Chapter 4, Problem 4.12E

Santana Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin, plant. The following costs are budgeted for the first quarter’s operations.

Machine setup, indirect materials	$4,000
Inspections	16,000
Tests	4,000
Insurance, plant	110,000
Engineering design	140,000
Depreciation, machinery	520,000
Machine setup, indirect labor	20,000
Property taxes	29,000
Oil, heating	19,000
Electricity, plant lighting	21,000
Engineering prototypes	60,000
Depreciation, plant	210,000
Electricity, machinery	36,000
Machine maintenance wages	19,000

Instructions

Classify the above costs of Santana Corporation into activity cost pools using the following: engineering, machinery, machine setup, quality control, factory utilities, maintenance. Next, identify a cost driver that may be used to assign each cost pool to each line of snowmobiles.

E4-12 Having itemized its costs for the first quarter of next year's budget. Santana Corporation desires to install an activity-based costing system. First, it identified the activity cost pools in which to accumulate factory overhead. Second, it identified the relevant cost drivers. (This was done in E4-6.)

Instructions

Using the activity cost pools identified in E4-6. classify each of those cost pools as either unit-level, batch-level, product-level, or facility-level.