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Adopting an activity-based approach for setting

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Reference no: EM132203745

KY makes several products including Product W. KY is considering adopting an activity-based approach for setting its budget. The company's production activities, budgeted activity costs and cost drivers for next year are given below:

Activity $ Cost driver Cost driver

Quantity

Set-up cost 200,000 No. of set-ups 800

Inspection /quality control 120,000 No. of quality test 400

Stores receiving 252,000 No. of purchase requisitions 1,800

Machines are reset after each batch. Quality tests are carried out after every second batch.

The budgeted data for Product W for next year are:

Direct materials $2.50 per unit

Direct labour 0.3 hrs per unit @ $18 per hour

Batch size 150 units

Number of purchase requisitions 80

Budget production 15,000 units

Required:

Calculate, using activity-based costing, the budgeted total production cost per unit for Product W.

Reference no: EM132203745

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