Problem 11 Activity Based Costing

Westerner Manufacturing has established the following cost pools for this year:

Cost Pool	Costs	Cost Drivers
Maintenance	$20,000	10,000 machine hours
Material handling	$25,000	250 moves
Machine setup	$30,000	1,000 hours
Inspection	$25,000	500 inspections
Total	$100,000	N/A

The following information pertains to two representative jobs completed during January:

Item	Job 101	Job 102
Direct materials	$10,000	$7,500
Direct labor	$8,000	$5,000
Units produced	2,000	1,500
Direct labor hours	640	400
Machine hours	700	650
Number of material moves	40	15
Number of setup hours	80	40
Number of inspections	35	15

11.2 Determine the cost per unit of Job 101 using machine hours to allocate all indirect costs.

		$5.00/mh
		$10/mh
		$12.50/mh
		$14/mh