Stanley Corp. manufactures two models of its roasting pans, a standard and a deluxe model. Three activities have been identified as cost drivers and the related costs pooled together to arrive at the following information:

-If activity-based costing is used, then the product setup cost for the standard model would be
A) $12,857.
B) $17,143.
C) $1,071.
D) $1,866.

Question

Stanley Corp. manufactures two models of its roasting pans, a standard and a deluxe model. Three activities have been identified as cost drivers and the related costs pooled together to arrive at the following information:
 
-If activity-based costing is used, then the product setup cost for the standard model would be
A) $12,857. 
B) $17,143. 
C) $1,071. 
D) $1,866.

Quizplus · Accepted Answer

To calculate the product setup cost for the standard model, we need to divide the total setup cost for the standard model by the number of units produced. Using activity-based costing, we can see that the total setup cost for the standard model is $3,213 + $6,427 = $9,640. The number of units produced is 2,000. Therefore, the product setup cost for the standard model would be $9,640/2,000 = $4.82 per unit. Multiplying this by the number of setups required for the standard model (222), we get $1,071. Therefore, the correct answer is C.