Question: Alrex company is using an activity-based costing (ABC) system. The company produces and sells two products: Basic and Pro. The company consists of two departments:
Alrex company is using an activity-based costing (ABC) system. The company produces and sells two products: Basic and Pro. The company consists of two departments: Production (where all manufacturing activities are taken) and Marketing (which engages in selling and admin activity only). The ABC system includes in unit product costs all costs easily associated with units. In addition, in the ABC system, there are four major indirect activities: Machine Setups, Special Processing, Factory Supervision, and Customer Relation.
The prices, direct material cost (DM), shipping cost and direct labor-hours (DLHs) are given below for one unit of the product, as well as the total units produced and sold.
| Product | Price | DM | DLHs | Hourly Wage-DL | Shipping Cost | Units |
| Basic | $180 | $50 | 1 | $10 | $1 | 6,000 |
| Pro | $320 | $80 | 2 | $12 | $4 | 4,000 |
The company collected the data for ABC as follows:
| Activity Cost Pool | Activity Measure | Estimated OH cost | Activity measures used | |
| Basic | Pro | |||
| Machine Setup | # of setups | $ 472,500 | 60 | 120 |
| Special Processing | Machine hours | $ 360,000 | 6,000 | 10,000 |
| Factory Supervision | DLH | $ 224,000 | ||
| Customer Relation (10 customers) | # of customers | $ 240,000 | ||
For Alrex Company, batch-level activities include (choose the most complete answer):
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