Reference no: EM131792726

New West Chemicals Ltd. engineers industrial cleaners. The two major chemicals that it produces are MLX and XLZ. The company uses an activity-based costing system with three cost pools: ? Process line costs of $1,248,000 consist of all costs required to maintain and run the equipment used to produce the chemicals. New West uses total machine hours for all equipment on the line as the cost driver. Total machine hours for the year were 12,000. ? Each production run for the company required between two and four hours to set up the process flow. The total cost for the year was $1,092,000, and total setup hours were set at 800.

A research and development team of chemical engineers was on staff to ensure that the process was streamlined and within government guidelines. The cost pool consisted of employee salaries, equipment and testing laboratory costs. Total cost for the year was $980,000, which was applied to product lines based on 2,500 hours of time.

The following activities occurred for the year for each product: MLX XLZ Total litres produced 100,000 75,000 Litres per batch 1,000 500 Process machine hours per batch 36 56 Setup hours per batch 2 4 Research and development 1,500 1,000 Total direct costs were $450,000 for MLX and $600,000 for XLZ

Which of the following is the correct cost per litre for each product (rounded to the nearest cent)?

a) MLX: $ 8.71; XLZ: $16.35

b) MLX: $12.35; XLZ: $27.79

c) MLX: $13.21; XLZ: $24.35

d) MLX: $16.85; XLZ: $35.79