Activity-Based Product Costing

Davis Company produces two hair dryers: regular and deluxe. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below.

		Regular		Deluxe		Total
Units produced		90,000		270,000
Prime costs		$7,380,000		$28,620,000		$36,000,000
Machine hours		90,000		450,000		540,000
Engineering hours		300		2,700		3,000
Receiving orders		300		900		1,200
Inspection hours		600		1,200		1,800
Overhead costs:
Machining		$5,400,000
Engineering		1,770,000
Receiving		468,000
Inspecting products		270,000

Required:

1. Calculate the four activity rates.

Machining rate	$fill in the blank 1 per machine hour
Engineering rate	$fill in the blank 2 per hour
Receiving rate	$fill in the blank 3 per order
Inspecting rate	$fill in the blank 4 per hour

2. Calculate the unit costs using activity rates. Round your answers to the nearest cent.

	Unit cost
Regular	$fill in the blank 5 per unit
Deluxe	$fill in the blank 6 per unit

Calculate the overhead cost per unit. Round your answers to the nearest cent.

	Overhead Cost
Regular	$fill in the blank 7 per unit
Deluxe	$fill in the blank 8 per unit

3. If consumption ratios instead of activity rates were used to assign costs instead of activity rates, show the cost assignment for the inspection activity.

	Cost assignment
Regular	$fill in the blank 9
Deluxe	$fill in the blank 10