Activity$-$Based Life$-$Cycle Costing

Unit$-$based system:

Variable conversion activity rate: $$110$ per direct labor hour

Material usage rate: $$10$ per part

ABC system:

Labor usage: $$15$ per direct labor hour

Material usage $($direct materials$)$: $$20$ per part

Machining: $$75$ per machine hour

Purchasing activity: $$170$ per purchase order

Setup activity: $$3,500$ per setup hour

Warranty activity: $$600$ per returned unit $($usually requires extensive rework$)$

Customer repair cost: $$25$ per repair hour $($average$)$

Activity and Resource Information $($annual estimates$)$

Required:

Select the lower$-$cost design using unit$-$based costing.

:

Are logistical and post$-$purchase activities considered in this analysis?

Select the lower$-$cost design using ABC analysis.

$.$

What if the post$-$purchase cost was an environmental contaminant and amounted to $$10$ per unit for Design A and $40$ per unit for Design B $?$ Compute the Post$-$purchase cost for each design.

Post$-$Purchase Cost