A firm produces and sells two products, Plus and Max. The following information is available relating to setup costs (a part of factory overhead): Using number of setups as the activity base, the amount of setup cost allocated to each unit of product for Plus and Max, respectively is:
A) $21.60; $.54.
B) $54.00; $27.00.
C) $60.00; $60.00.
D) $108.00; $2.70.
E) $200.00; $16,000.00

Question

A firm produces and sells two products, Plus and Max. The following information is available relating to setup costs (a part of factory overhead):   Using number of setups as the activity base, the amount of setup cost allocated to each unit of product for Plus and Max, respectively is:
A) $21.60; $.54. 
B) $54.00; $27.00. 
C) $60.00; $60.00. 
D) $108.00; $2.70. 
E) $200.00; $16,000.00

Quizplus · Accepted Answer

Plus: 20 setups × $1,080 per setup = $21,600/200 units = $108/unit
Max: 40 setups × $1,080 per setup = $43,200/16,000 units = $2.70/unit

A Firm Produces and Sells Two Products, Plus and Max