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.

BasicAdvancedTotal

Units produced80,000240,000------

Prime costs$6,720,000$27,360,000$34,080,000

Machine hours80,000400,000480,000

Engineering hours5004,5005,000

Receiving orders200600800

Inspection hours8001,6002,400

Overhead costs:

Machining$7,200,000

Engineering2,250,000

Receiving192,000

Inspecting products336,000

Required:1. Calculate the four activity rates.

Machining rate$ per machine hou

rEngineering rate$ per hour

Receiving rate$ per order

Inspecting rate$ per hour

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

Unit cost

Basic$ per unit

Advanced$ per unit

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

Overhead Cost

Basic$ per unit

Advanced$ per unit

3. What if consumption ratios instead of activity rates were used to assigned costs? Show the cost assignment for the inspection activity.

Cost assignment

Basic $

Advanced $