Activity-Based Product Costing Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows: Activity Production Activity Cost Pool $259,200 55,000 Setup Materials handling 9,750 Inspection Product engineering 60,000 123,200 $507,150 Total The activity bases identified for each activity are as follows: Activity Activity Base Production Machine hours Setup Materials handling Number of setups Number of parts Number of inspection hours Number of engineering hours Inspection Product engineering The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: Number of Number of Machine Number of Number of Inspection Engineering Email Instructor Submit Test for Grading Machine Hours Number of Setups Number of Parts Number of Inspection Hours Number of Engineering Hours Units Alpha 1,440 75 1,800 400 300 125 175 Beta 1,080 165 80 1,350 Omega 310 180 500 140 900 720 3,240 Total 550 325 1,200 440 4,050 Each product requires 48 minutes per unit of machine time. Required: If required, round all per unit amounts to the nearest cent. 1. Determine the activity rate for each activity. Production per machine hour Setup per setup Materials handling per part Inspection per inspection hour Product engineering per engineering hour 2. Determine the total and per-unit activity cost for all three products. Total Activity Cost Activity Cost Per Unit Alpha Beta Omega 3. Why aren't the activity unit costs equal across all three products since they require the same machine time per unit? The unit costs are different because the products consume many activities in ratios different from the