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Question
A firm produces and sells two products, Mica and Plax. The following information is available relating to setup costs (a part of factory overhead):
| Mica | Plax | ||
| Units produced.................... | 200 | 16,000 | |
| Batch size (units)................. | 10 | 400 | |
| Number of setups................. | 20 | 40 | |
| Direct labor hours per unit... | 5 | 5 | |
| Total direct labor hours....... | 1,000 | 80,000 | |
| Cost per setup...................... | $ 1,080 | ||
| Total setup cost................... | $64,800 |
With traditional two-stage allocation of overhead costs, using direct labor hours as the allocation base, the setup cost portion of overhead that is allocated to each unit of product for Mica and Plax, respectively is:
A. $.80; $.80.
B. $3.20; $3.20.
C. $4.00; $4.00.
D. $160.00; $12,800.00.
E. $200.00; $16,000.00.
Answer
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