Vernon Company makes two types of circuit boards. One is a high-caliber board designed to...
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Accounting
Vernon Company makes two types of circuit boards. One is a high-caliber board designed to accomplish the most demanding tasks; the other is a low-caliber board designed to provide limited service at an affordable price. During its most recent accounting period, Vernon incurred $340,000 of inspection cost. Vernon recently established an activity-based costing system that classifies its activities into four categories. Categories and appropriate cost drivers follow:
Direct Labor Hours
Number of Batches
Number of Inspectors
Number of Square Feet
High caliber
9,000
25
9
70,000
Low caliber
25,000
25
8
100,000
Total
34,000
50
17
170,000
Required Allocate the inspection cost between the two products assuming that it is driven by (a) unit-level activities, (b) batch-level activities, (c) product-level activities, or (d) facility-level activities. Note that each allocation represents a separate alternative. In other words, the $340,000 of inspection cost will be allocated four times, once for each cost driver. (Do not round intermediate calculations.)
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