Question
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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