Question 174152: Can someone please, please help me figure out how to do this problem:
Hart requires approximately 1 hour of labor to make one handle bar of either type. During the most recent accounting period, the company made 8,000 steel bars and 2,000 titanium bars. Setup costs amounted to $48,000 for the 24 batches (i.e., 12 of each type) of bars produced during the period. If activity-based costing is used to allocate overhead costs to the two products, the amount of setup cost assigned to the titanium bars will be:
$9,600
$24,000
$38,400
$48,000
Answer by Mathtut(3670)   (Show Source):
You can put this solution on YOUR website! B - $24,000 - Since there are 24 activities (set-ups) and since time is not given so we can assume it takes the same amount of time to do each set-up, each set-up costs $2,000. Since each type of production (steel and titanium) has 12 set-up, $2,000 time 12 = $24,000.
Under unit based accounting, which is what most companies still do, the titanium cost would have been $9,600 (20% of the total set-up cost, since 20% or output was titanium handle bars). This of course would have been overcharging steel handle bar production since since in reality, half the costs should be allocated to the 1/2 the set-ups for titanium handle bars.
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