Assume the Busy Ball Company makes two types of bouncing balls; one has a hollow center and
Question:
Assume the Busy Ball Company makes two types of bouncing balls; one has a hollow center and the other has a solid center. The same equipment is used to produce the balls in different runs. Between batches, the equipment is cleaned, maintained, and set up in the proper configuration for the next batch. The hollow center balls are packaged with two balls per package, and the solid center balls are packaged one per package. During the year, Busy Ball expects to make 1,000,000 hollow center balls and 2,000,000 solid center balls
The overhead costs incurred have been allocated to activity pools as follows:
Activity Pool | Cost Driver | Total Units for Cost Driver |
Purchasing of Materials | #Cleaning and Maintenance | 100 |
Set up of Machines | #Setup | 252 |
Packaging | #Containers filled | 2,500,000 |
Testing | #Test | 3,000 |
Cleaning and Maintenance | #off runs | 252 |
By analyzing the activity pools, the accountants and production managers have identified the cost drivers, estimated the total expected units for each product, and calculated the unit cost for each cost driver.
Using the information provided on the Busy Ball Company and the concept of activity-based costing, answer the following question:
Calculate the unit cost for hollow center balls and solid center balls under the activity-based costing method.
Accounting for Decision Making and Control
ISBN: 978-1259564550
9th edition
Authors: Jerold Zimmerman