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 Activity Cost Pool Production $259,200 55,000 Setup Materials handling 9,750 Inspection 60,000 Product engineering 123,200 Total $507,150 The activity bases identified for each activity are as follows: Activity Activity Base Production Machine hours Number of setups Setup Materials handling Number of parts Inspection Number of inspection hours Number of engineering hours Product engineering The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: Machine Number of Number of Number of Inspection Hours Number of Engineering Hours Hours Setups Parts Units Alpha 1,440 75 65 400 125 1,800 Beta 1,080 165 80 300 175 1,350 Omega 720 310 180 500 140 900 Total 3,240 550 325 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