Activity-based product costing OBJ. 4 Teldar Manufacturing Company is a diversified manufacturer that manufactures three products (M5, Z4, and I8) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

Activity Activity Cost Pool Production $264,000 Setup 96,000 Material handling 9,600 Inspection 50,000 Product engineering 150,000 ________ Total $569,600 ________ ________ The activity bases identified for each activity are as follows:

Activity Activity Base Production Machine hours Setup Number of setups Material handling Number of parts Inspection Number of inspection hours Product engineering Number of engineering hours The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:
Number of Number of Machine Number of Number of Inspection Engineering Hours Setups Parts Hours Hours Units M5 1,000 60 80 450 125 1,250 Z4 800 120 150 300 175 1,000 I8 400 220 250 250 200 500 _____ ___ ____ _____ ___ _____ Total 2,200 400 480 1,000 500 2,750 _____ _____ ___ ___ ____ ____ _____ _____ ___ ___ _____ _____ Each product requires 0.8 machine hour per unit.
Instructions 1. Determine the activity rate for each activity.
2. Determine the total and per-unit activity cost for all three products.
3. Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit?