Badger Boards, Inc

Essay

Badger Boards, Inc.(BBI) is a manufacturer of circuit boards for a handful of computer manufacturers. The following data pertains to the month of February for the assembly of circuit boards for two of BBI's major customers: MBI, Inc. and CAM, Inc.
● Material costs used and supplied for 14,000 boards for MBI, $80,000; 8,000 boards for CAM $80,000
● Batch setup labor cost used for 20 batches of boards for MBI, $4,000; 8 batches of boards for CAM, $2,400
● Batch setup materials used and supplied for 28 batches, $11,200
● Labor supplied for production of boards for both customers, $56,000; usage based on number of manually assembled parts: 8 for each of the boards for MBI and 16 for each of the boards for CAM
● Facility-level equipment used on a per unit basis for both products, $50,000
● Special packaging and shipping provided on a per unit basis to customers, $21,000 shipping, $14,000 for materials, and $28,000 for labor
● Custodial and security service for the manufacturing area, $1,500
a) Prepare an activity matrix as follows: In column 1, list all the activities according to their level of usage (i.e., unit-level, batch-level, etc.). In column 2, list the cost driver base for each activity listed in the previous column. In the remaining columns (3 through 10), fill in the appropriate numbers.
Note that columns 3 through 10 are to be labeled as follows: unit-level resources, batch resources, product resources, customer resources, facility resources, total resources supplied, driver base level and cost driver rate.
b) Compute the unit-level and full-ABC costs per unit for the boards produced for the two different customers.
c) Brenda Baker, the production supervisor at BBI, suggests that doubling the batch size will reduce the costs driven by the number of batches by 50%. Do you agree? Explain.