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Activity based costing computing per unit

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Part 5: The Gamble Company

Gamble Company produces 50,000 units of Product Q and 6,000 units of Product Z during a period. In that period, four set-ups were required for color changes. All units of Product Q are black, which is the color in the process at the beginning of the period. A set-up was made for 1,000 blue units of Product Z; a set-up was made for 4,500 red units of Product Z; a set-up was made for 500 green units of Product Z. A set-up was then made to return the process to its standard black coloration and the units of Product Q were run. Each set-up costs $500.

a. If set-up cost is assigned on a volume basis for the department, what is the approximate per-unit set-up cost for Product Z?

b. If set-up cost is assigned on a volume basis for the department, what is the approximate per-unit set-up cost for the red units of Product Z?

c. Assume that Gamble Company has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per-unit set-up cost for the blue units of Product Z?

d. Assume that Gamble Company has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per-unit set-up cost for the green units of Product Z?

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Solution shows calculation of per unit set up cost for 4 types of product produced by the company.

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Part 5: The Gamble Company

Gamble Company produces 50,000 units of Product Q and 6,000 units of Product Z during a period. In that period, four set-ups were required for color changes. All units of Product Q are black, which is the color in the process at the beginning of the period. A set-up was made for 1,000 blue units of Product Z; a set-up was made for 4,500 red units of Product Z; a set-up was made for 500 green units of Product Z. A set-up was then made to return the process to its standard black coloration and the units of ...

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