Wieters Industries manufactures several products including a basic case for a popular smartphone. The company is considering adopting an activity-based costing approach for setting its budget. The company’s production activities, budgeted activity costs, and cost drivers for the coming year are as follows.

The budgeted data for smartphone case production are as follows.

Direct materials                      . . . . . . . . $1.25 per unit

Direct labor                             . . . . . . . . $0.80 per unit

Number of setups                  . . . . . . . .                  260

Number of quality tests        . . . . . . . .                     75

Number of purchase orders . . . . . . . .                     50

Production                                . . . . . . . . 250,000 units

Required

a. Calculate the activity rate for each cost pool.

b. Calculate the activity-based unit cost of the smartphone case.

Transcribed Image Text:

Cost Driver Activity Overhead $ $ 200,000 Cost Driver # of setups # of quality tests # of purchase orders Activity Quantity Machine setup Inspection Materials receiving 2,500 160,000 400 252,000 3,000