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Sagot :
Product Y would be allocated 20% of the machine setups cost
Product Z would be allocated 80% of the machine setups cost
What is activity-based costing?
Activity-based costing is a costing method where overhead cost of production are allocated based on the cost driver responsible for the overhead rather than using the plantwide overhead rate based on direct labor-hours.
In this case, we need to first of all determine the machine setups cost per per setups, based on the fact there 300 setups for both products Y and Z
machine setup cost per setup=Machine setups cost/Number of setups
Machine setups cost=$180,000
Number of setups=300
machine setup cost per setup=$180,000/300
machine setup cost per setup=$600
Total set up cost for product Y=60*$600=$36000
Total set up cost for product Y as %=$36,000/$180,000=20%
Total set up cost for product Z=240*$600=$144,000
Total set up cost for product Z as %=$144,000/$180,000=80%
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