Assume Sherwin-Williams Company, a large paint manufacturer, has determined the following activity cost pools and cost driver levels for the latest period: Activity Cost Pool Activity Cost Activity Cost Driver Machine setup $960,000 2,500 setup hours Material handling 830,000 5,000 material moves Machine operation 200,000 20,000 machine hours The following data are for the production of single batches of two products, Mirlite and Subdue: Mirlite Subdue Gallons produced 50,000 30,000 Direct labor hours 400 250 Machine hours 800 250 Direct labor cost $9,500 $7,000 Direct materials cost $360,000 $160,000 Setup hours 15 12 Material moves 60 35 Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC. Round cost per gallon to two decimal places. Product Costs Mirlite Subdue Direct materials Answer Answer Direct labor Answer Answer Manufacturing overhead: Machine setups Answer Answer Material handling Answer Answer Machine operation Answer Answer Total cost per batch Answer Answer Gallons produced Answer Answer Cost per gallon Answer Answer
Assume Sherwin-Williams Company, a large paint manufacturer, has determined the following activity cost pools and cost driver levels for the latest period:
| Activity Cost Pool | Activity Cost |
Activity Cost Driver |
|---|---|---|
| Machine setup | $960,000 |
2,500 setup hours |
| Material handling | 830,000 |
5,000 material moves |
| Machine operation | 200,000 |
20,000 machine hours |
The following data are for the production of single batches of two products, Mirlite and Subdue:
| Mirlite | Subdue | |
|---|---|---|
| Gallons produced | 50,000 | 30,000 |
| Direct labor hours | 400 | 250 |
| Machine hours | 800 | 250 |
| Direct labor cost | $9,500 | $7,000 |
| Direct materials cost | $360,000 | $160,000 |
| Setup hours | 15 | 12 |
| Material moves | 60 | 35 |
Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC.
Round cost per gallon to two decimal places.
| Product Costs | ||
|---|---|---|
|
Mirlite |
Subdue |
|
| Direct materials | Answer | Answer |
| Direct labor | Answer | Answer |
| Manufacturing |
||
| Machine setups | Answer | Answer |
| Material handling | Answer | Answer |
| Machine operation | Answer | Answer |
| Total cost per batch | Answer | Answer |
| Gallons produced | Answer | Answer |
| Cost per gallon | Answer | Answer |
Product cost refers to the costs of manufacturing a product. These prices include direct labor, direct materials, consumable production supplies, and factory overhead. The cost of labor used to provide a service to a customer can also be included in the product price. In the latter instance, product cost should include all costs connected with a service, such as compensation, payroll taxes, and employee benefits. Product cost is included in the financial statements since it includes the production overhead needed by both GAAP and IFRS.
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