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Activity cost pools , activity rates , and product costs using activity-based costing Hipster Home Appliances Inc. is estimating the activity cost associated with producing

Activity cost pools, activity rates, and product costs using activity-based costing

Hipster Home Appliances Inc. is estimating the activity cost associated with producing ovens and refrigerators. The indirect labor can be traced into four separate activity pools, based on time records provided by the employees. The budgeted activity cost and activity-base information are provided as follows:

Activity

Activity Pool Cost

Activity Base

2

Procurement

$66,000.00

Number of purchase orders

3

Scheduling

4,120.00

Number of production orders

4

Materials handling

13,280.00

Number of moves

5

Product development

8,100.00

Number of engineering changes

6

Total cost

$91,500.00

The estimated activity-base usage and unit information for two product lines was determined from corporate records as follows:

Number of
Purchase Orders Production Orders Moves Engineering Changes Units
Ovens 400 136 240 68 740
Refrigerators 260 70 175 40 600
Totals 660 206 415 108 1,340

Complete the Activity Table for ovens.

A. Determine the activity rate for each activity. Enter these rates in the Activity Rate column.

B. Use the activity rates in (A) to determine the total and per-unit activity costs associated with each product. Round the per-unit rates to the nearest cent.

Ovens
Activity Activity-
Base Activity Activity
Usage X Rate = Cost
Procurement
Scheduling
Materials handling
Product development
Total
Unit volume
Activity cost per unit

Complete the Activity Table for refrigerators.

A. Determine the activity rate for each activity. Enter these rates in the Activity Rate column.

B. Use the activity rates in (A) to determine the total and per-unit activity costs associated with each product. Round the per-unit rates to the nearest cent.

Refrigerators
Activity Activity-
Base Activity Activity
Usage X Rate = Cost
Procurement
Scheduling
Materials handling
Product development
Total
Unit volume
Activity cost per unit

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