Magill Corporation manufactures Products A and B. Each equipment setup costs $2,000. During 2010, Magill had 15 equipment setups during the year: four to make Product A and 11 to make Product B. Magill produced 1,000,000 and 500,000 units of Products A and B, respectively.

Required:
a. Assume Magill treats setup as a unit-level cost. How much total setup cost is assigned to Products A and B? How much cost is assigned on a per-unit basis for Product A and Product B?
b. Assume Magill treats setup as a batch-level cost. How much per-unit setup cost is assigned to Product A and to Product B?

Question

Magill Corporation manufactures Products A and B. Each equipment setup costs $2,000. During 2010, Magill had 15 equipment setups during the year: four to make Product A and 11 to make Product B. Magill produced 1,000,000 and 500,000 units of Products A and B, respectively. 
	
Required:
a.	Assume Magill treats setup as a unit-level cost. How much total setup cost is assigned to Products A and B? How much cost is assigned on a per-unit basis for Product A and Product B?
b.	Assume Magill treats setup as a batch-level cost. How much per-unit setup cost is assigned to Product A and to Product B?

Quizplus · Accepted Answer

The Answer of Magill Corporation manufactures Products A and B. Each equipment setup costs $2,000. During 2010, Magill had 15 equipment setups during the year: four to make Product A and 11 to make Product B. Magill produced 1,000,000 and 500,000 units of Products A and B, respectively. 
	
Required:
a.	Assume Magill treats setup as a unit-level cost. How much total setup cost is assigned to Products A and B? How much cost is assigned on a per-unit basis for Product A and Product B?
b.	Assume Magill treats setup as a batch-level cost. How much per-unit setup cost is assigned to Product A and to Product B?

Magill Corporation Manufactures Products a and B