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		100,000		300,000
Prime costs		$7,000,000		$35,400,000		$42,400,000
Machine hours		100,000		500,000		600,000
Engineering hours		200		1,800		2,000
Receiving orders		300		900		1,200
Inspection hours		1,000		2,000		3,000
Overhead costs:
Machining		$9,000,000
Engineering		1,200,000
Receiving		480,000
Inspecting products		450,000

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