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Elton Company manufactures wheel rims

Price: $2.50

E18-17 Product costing in an activity-based costing system [20–30 min]
Elton Company manufactures wheel rims. The controller budgeted the following
ABC allocation rates for 2012:

Materials handling Number of parts 4.00
Machine setup Number of setups 500
Insertion of parts Number of parts 23.00
Finishing Finishing hours 50.00

The number of parts is now a feasible allocation base because Elton recently purchased
bar coding technology. Elton produces two wheel rim models: standard and
deluxe. Budgeted data for 2012 are as follows:

Parts per rim 6.0 9.0
Setups per 500 rims 17.0 17.0
Finishing hours per rim 5.0 6.5
Total direct labor hours per rim 6.0 7.0

The company expects to produce 500 units of each model during the year.

1. Compute the total budgeted indirect manufacturing cost for 2012.
2. Compute the ABC indirect manufacturing cost per unit of each model. Carry
each cost to the nearest cent.
3. Prior to 2012, Elton used a direct labor hour single-allocation-base system.
Compute the (single) allocation rate based on direct labor hours for 2012. Use
this rate to determine the indirect manufacturing cost per wheel rim for each
model, to the nearest cent.

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