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Activity-Based Product Costing Roberts Company produces two weed eaters: basic and advanced. The company has four activities: machining, engineering, receiving, and inspection. Information on these
Activity-Based Product Costing Roberts Company produces two weed eaters: basic and advanced. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below. Basic Advanced Total Units produced 100,000 300,000 Prime costs $9,000,000 $34,800,000 $43,800,000 Machine hours 100,000 500,000 600,000 Engineering hours 400 3,600 4,000 Receiving orders 500 1,500 2,000 Inspection hours 600 1,200 1,800 Overhead costs: Machining $5,400,000 Engineering 1,880,000 Receiving 480,000 Inspecting products 252,000 Required: Required: 1. Calculate the four activity rates. Machining rate 9 per machine hour Engineering rate 470 per hour Receiving rate $ 240 per order Inspecting rate $ 140 per hour 2. Calculate the unit costs using activity rates. Round your answers to the nearest cent. Unit cost Basic 102.92 per unit Advanced 138.46 X per unit Calculate the overhead cost per unit. Round your answers to the nearest cent. Overhead Cost Basic 12.92 per unit Advanced 22.46 X 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 Basic $100,800 x Advanced 151,200 x Feedback Check My Work 1. Machining rate: Overhead costs Total machine hours. The other three activity rates are calculated the same way using each activity's Overhead costs and totals. 2. Use the calculations from Requirement 1 to calculate the unit costs and also calculate OH cost per unit. Example of Total cost: Activity rate (above) Basic OH costs and also Activity rate Advanced OH costs. Example of OH costs per units: Total manufacturing costs: Units of production = Unit Cost (for Basic and Advanced). 3. Calculate unit costs using consumption ratios. Compare to activity rate unit costs. To assign inspection cost use the inspection hrs. for basic/advanced = total inspection hrs. for both and give a conclusion
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