Appleby Manufacturing uses an activity-based costing system….
Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G. Information relating to the two products is as follows: Model F Model G Units produced 24,000 30,000 Machine hours 7,500 8,500 Direct labor hours 8,000 12,000 Material handling (number of moves) 4,000 6,000 Setups 5,000 7,000 Purchase orders 30 40 Inspections 10,000 14,000 Product line variations 8 12 The following overhead costs are reported for the following activities of the production process: Material handling $ 40,000 Labor-related overhead 120,000 Setups 60,000 Product design 100,000 Batch inspections 120,000 Central purchasing 70,000 Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below: Activity Cost Pool Driver Pool Rate Model F Activity Model F Cost Model G Activity Model G Cost Total Material handling $40,000 10,000 $4 4,000 $16,000 6,000 $24,000 $40,000 Labor related overhead $120,000 20,000 $6 8,000 $48,000 12,000 $72,000 $120,000 Setups $60,000 12,000 $5 5,000 $25,000 7,000 $35,000 $60,000 Product design $100,000 20 $5,000 8 $40,000 12 $60,000 $100,000 Batch inspections $120,000 24,000 $5 10,000 $50,000 14,000 $70,000 $120,000 Central purchasing $70,000 70 $1,000 30 $30,000 40 $40,000 $70,000 total $209,000 $301,000 $510,000 Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. Under this new approach, what cost would be assigned to materials handling?
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