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Essay heading: John Deer
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Business |
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| Date added: |
July 31, 1999 |
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3 / 612 |
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CDE produces X1 in 50 batches of 200 units each, whereas it produces X2 in just 2 batches of 5,000 units each. Setup for X1 and X2 are equally complex, and take 1 hour to complete. Thus, the total setups incurred by CDE is 52 per annum (50 for X1 and 2 for X2). [Expressing setups in terms of the "transaction driver" (i...
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Assuming that, for simplifying reasons, the $52,000 setup costs are the totality of the overhead costs, the OH-rate in CDE thus is $52,000 / 20,000 MHRs, or $2.60 per MHR.
Allocating OH back to X1 and X2, how much OH does each product then get assigned?
X1: 10,000 MHRs x $2.60 per MHR, or $26,000;
X2: 10,000 MHRs x $2...
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