Question: Jackson Enterprises manufactures two productsa basic gizmo and an advanced model gizmo. The company is using an activity-based costing system. They have identified three activities

  1. Jackson Enterprises manufactures two productsa basic gizmo and an advanced model gizmo. The company is using an activity-based costing system. They have identified three activities for allocation of indirect costs.

Activity Cost Driver Cost-Allocation Rate

Materials receiving Number of parts $2.00 per part

Production setup Number of setups $500.00 per setup

Quality inspection Inspection time $90 per hour

A production run for the basic model is 250 units, for the advanced model, 100 units.

Each unit of product consumes the following activities:

Number of Parts Number of Setups Inspection Time

Basic Gizmo 10 1 setup 10 minutes

per production run

Advanced Gizmo 15 1 setup 20 minutes

per production run

Direct costs for the two products are as follows:

Direct Materials Direct Labor

Basic Gizmo $50.00 $ 75.00

Advanced Gizmo $95.00 $125.00

The total cost of an advanced model would be

  1. $285
  2. $65.
  3. $200.
  4. $162

Show your calculate:

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