C G H Activity Cost Pool $30,000 $120,000 No. of Setups $360,000 Problem 3 Activity based Costing (5+21+3) 3 Holt Manufacturing Company produces three model of an electronic device (Standard, Premium and Super) in a 4 continuous production process. Senior management has asked the controller to conduct an activity-based costing study. 5 The controller identified the amount of factory overhead required by the critical manufacturing activities as follows: 6 7 Activities Materials handling Setup 10 Machining Activity Base No. of Material order (MO) No of Machine Hours (MH) 11 Engineering $154,000 No of Engineering Hours (EH) 12 Inspection 13 $108,000 $772,000 No of Inspection Hours (H) 14 15 The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows 16 17 No of Material No. of Setups 18 Orders (MO) No. of Machine hours (MH) No of Engineering hours (EH) No. of Inspection hours H Number of Units Produced 19 Standard 20 Pmmium 350 250 3,000 250 280 250 180 2,000 230 170 21 Super 400 170 1,000 220 150 22 Total 23 1,000 000 6,000 700 600 24 Each product requires 30 minutes per unit of machine time 25 26 Required 27 A Determine the activity rate for each activity Round all per unit amounts to the nearest cent 28 Formula: Activity rate Activity cost pool Number of activity base 29 30 Activites Activity Cost Pool 31 Materials handling 32 Setup 33 Machining 34 Engineering Number of Activity Base used No of MO No. of Setups No. of MH No. of EH Activity cost driver rate 35 Inspection 36 37 8. Determine the total and per-unit activity cost for all three products No. of H 38 Round all total costs to whole number and round all per unit amounts to the nearest cent 39 Formula: Quantity of Activity-Base Usage x Activity rate from Req. (1) Activity cost 40 Sum all activity costs per product to determine the total activity costs and 41 Divide the total activity costs by the number of units anduced to compute the activity costs per unit for each and 42 43 Products 44 Standard 45 Premium 46 Super 47 Total 48 Materials handing Machining 1,500 1,000 500 Engineering Inspection Total activity costs Unit activity cost 49 C. Why aren't the unit activity costs equal across all three products since they require the same machine me per unit? 50 51 Answer 52 53 54 55