Hammock Company Manufactures Two Models of Its Hammock, the Superior

question 35

Multiple Choice

Hammock Company manufactures two models of its hammock, the Superior and the Deluxe.The Superior model requires 10,000 direct labour hours and the Deluxe requires 40,000 direct labour hours.The company produces 4,000 units of the Superior model and 1,000 units of the Deluxe model each year.The company produces the Superior model in batch sizes of 200, while it produces the Deluxe model in batch sizes of 100.The company expects to incur $120,000 of total setup costs this year.How much of the setup costs are allocated to the Superior model using ABC costing?

• A)$80,000
• B)$60,000
• C)$24,000
• D)$100,000

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Definitions:

Bottleneck

A stage in a process that reduces the overall capacity because it runs at the slowest speed.

Contribution Margin

The excess of sales over variable costs.

Bottleneck Hour

Bottleneck Hour refers to the specific time period during which the flow of operations or processes is significantly slowed down due to limitations in capacity.

Bottleneck

A stage in a process that reduces the efficiency of the overall system due to limited capacity or resource.