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3. What if the machine hours were used for the plantwide rate? Would this remove the cost dis- tortion of a plantwide rate? Cornerstone Exercise
3. What if the machine hours were used for the plantwide rate? Would this remove the cost dis- tortion of a plantwide rate? Cornerstone Exercise 4.5 Activity-Based Product Costing Roberts Company produces two weed eaters: basic and advanced. The company has four activi- ties: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below. Basic Advanced Total Units produced Prime costs Machine hours Engineering hours Receiving orders Inspection hours 100,000 $8,000,000 100,000 400 400 800 300,000 $30,000,000 *500,000 3,600 1,200 1,600 $38,000,000 600,000 4,000 1,600 2,400 Overhead costs: Machining Engineering Receiving Inspecting products $6,000,000 2,000,000 560,000 360,000 Required: 1. Calculate the four activity rates. 2. Calculate the unit costs using activity rates. Also, calculate the overhead cost per unit. 3. What if consumption ratios instead of activity rates were used to assign costs instead of activity rates? Show the cost assignment for the inspection activity. Cornerstone Exercise 4.6 Assigning Cost of Resources to Activities, Unbundling the OBJE General ledger
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