Millennium Ideas Ltd. manufactures odd size sporting equipment sold over the internet. Two items, Dive Masks and Fins are manufactured on a common assembly line. Although different direct materials are used, the direct labour cost is the same for each product line.
The plantwide rate for allocating manufacturing overhead to its products is no longer acceptable. The production manager has heard about activity-based costing and has assembled some information for use in changing the cost system to a cost driver concept.
With the help of the accounting department, the manager has been able to establish the following relationships between production costs and some of the indirect manufacturing activities for August, along with the production data for the two product lines:
Required:
Using activity-based costing determine the total production cost of each of the two product lines for August and the cost per unit assuming all units started were completed.

Question

Millennium Ideas Ltd. manufactures odd size sporting equipment sold over the internet. Two items, Dive Masks and Fins are manufactured on a common assembly line. Although different direct materials are used, the direct labour cost is the same for each product line.
The plantwide rate for allocating manufacturing overhead to its products is no longer acceptable. The production manager has heard about activity-based costing and has assembled some information for use in changing the cost system to a cost driver concept.
With the help of the accounting department, the manager has been able to establish the following relationships between production costs and some of the indirect manufacturing activities for August, along with the production data for the two product lines:
  Required:
Using activity-based costing determine the total production cost of each of the two product lines for August and the cost per unit assuming all units started were completed.

Quizplus · Accepted Answer

The Answer of Millennium Ideas Ltd. manufactures odd size sporting equipment sold over the internet. Two items, Dive Masks and Fins are manufactured on a common assembly line. Although different direct materials are used, the direct labour cost is the same for each product line.
The plantwide rate for allocating manufacturing overhead to its products is no longer acceptable. The production manager has heard about activity-based costing and has assembled some information for use in changing the cost system to a cost driver concept.
With the help of the accounting department, the manager has been able to establish the following relationships between production costs and some of the indirect manufacturing activities for August, along with the production data for the two product lines:
  Required:
Using activity-based costing determine the total production cost of each of the two product lines for August and the cost per unit assuming all units started were completed.