Books Company Manufactures and Sells Two Products: Soft Cover (S)

Essay

Books Company manufactures and sells two products: Soft Cover (S) and Hard Cover (H). The firm's activities have been analyzed and placed into a hierarchy of activity costs. Presented is information on activity cost drivers and costs per unit of cost driver at each activity level. $$\begin{array} { l l l } \text { Activity Level } & \text { Activity } & \text { Cost } \\\text { Unit level } & X _ { 11 } , \text { S acquire direct materials } & b _ { 11 } , £ 6 \\& X _ { 12 } , \text { H acquire direct materials } & b _ { 12 } , £ 10 \\& X _ { 13 } , \text { S other manufacturing costs } & b _ { 1 } , £ 2 \\& X _ { 14 } , \text { H other manufacturing costs } & b _ { 14 } , £ 4 \\\text { Batch level } & X _ { 21 } , \text { S setup } & b _ { 21 } , £ 200 \\& X _ { 2 } , \text { H setup } & b _ { 22 } , £ 300 \\\text { Product level } & X _ { 31 } , \text { S advertising } & b _ { 31 } , £ 20,000 \\& X _ { 32 } , \text { H advertising } & b _ { 32 } , £ 30,000 \\\text { Facility level } & X _ { 41 } , \text { Rent } & b _ { 41 } , £ 10,000\end{array}$$ During January 2012, Books Company produced 10,000 units of Soft Covers and 5,000 units of Hard Covers. Each batch of products includes 1,000 units of Soft Covers or 1,000 units of Hard Covers.