Activity Based Costing

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Make a Decision: Analyze Gourmet Master, Inc. (from Chapter 4)

Obj. 7 Gourmet Master, Inc., uses activity-based costing to determine the cost of its stainless steel ovens. Activity-based product cost information is as follows:
Activity

Activity-Base
Usage (hrs. per unit)
x Activity Rate
per Hour
=
Activity Cost
Fabrication 0.75 $24.00 $18.00
Assembly 1.50 20.00 30.00
Inspection 0.30 25.00 7.50
Moving 0.25 12.00 3.00
Total activity cost per unit $58.50

These activities only include the labor portion of the cost. Fabrication is the cutting and shaping of metal to be used in the assembly of the ovens. If the metal is not fabricated properly, additional time is required during final assembly to trim and adjust the metal pieces to fit properly. This has been a problem in Assembly. Management proposes improvements in Fabrication requiring the fabrication work to be done slower, but more accurately. As a result, the time in fabrication will increase to an hour per unit. However, because of the additional care, the parts are expected to fit better during assembly, thus reducing assembly time to 1.10 hours per unit.

a. Determine the revised activity-based cost per unit under the new fabrication plan.

b. Does this plan reduce the activity cost per unit of the oven?

Be sure to show your work and highlight your answer to each question.

Submit your well-formatted response as a PDF or Word Doc. Assignment submissions will be checked by Unicheck plagiarism detection.

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Activity Based Costing

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How does an understanding of Activity Based Costing impact the sale price of a product? Would you target a fix cost (real estate for example) or a variable cost (cost of materials that could be discounted if purchased in bulk) to reduce expenses and why?

Your assignment should be at least two pages and use at least one source. Any citations must use APA format.

rubic

Criteria Weight
Explains how an understanding of Activity Based Costing can impact the sale price of a product 45
Would you target a fix cost (real estate for example) or a variable cost (cost of materials that could be discounted if purchased in bulk) to reduce expenses and why? 45
Assignment is at least 2 pages and uses at least 1 source 10
Total 100
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We offer the best essay writing services to students who value great quality at a fair price. Let us exceed your expectations if you need help with this or a different assignment. Get your paper completed by a writing expert today. Nice to meet you! Want 15% OFF your first order? Use Promo Code: FIRST15. Place your order in a few easy steps. It will take you less than 5 minutes. Click one of the buttons below.


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