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tone Cold Brew is a successful brewery engaged in the development and production of specialty micro brews
tone Cold Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities.
During the past year, it has incurred:
Cost
Description$725,000
Product development costs$475,000
Materials handling costs$1,250,000
Production line labor costs$450,000
Production setup costs$250,000
Power costs (for cooling beer and running equipment)$875,000
Manufacturing facility management costs
Using the manufacturing cost hierarchy, what is the total cost that would be classified as unit-level activity costs?
Select one:
A. $1,945,000
B. $ 425,000
C. $1,975,000
D. $1,250,000
Expert Solution
Computation of Unit-level Activity Costs:
Material Handling Costs = $1,250,000
Production Line Labor Costs = $450,000
Power Costs (for cooling beer and running equipment) = $875,000
Total Unit Cost = ($475,000+ $1,250,000 + $250,000) = $1,975,000
Using the manufacturing cost hierarchy, Total Cost that would be classified as unit-level activity costs is $1,975,000.
So, the correct option is C "$1,975,000".
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