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Activity-Based Product Costing

Davis Company produces two hair dryers: regular and deluxe. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below.

		Regular		Deluxe		Total
Units produced		100,000		200,000
Prime costs		$16,000,000		$60,000,000		$76,000,000
Machine hours		200,000		1,000,000		1,200,000
Engineering hours		800		7,200		8,000
Receiving orders		800		2,400		3,200
Inspection hours		1,600		3,200		4,800
Overhead costs:
Machining		$24,000,000
Engineering		8,000,000
Receiving		2,240,000
Inspecting products		1,440,000

Required:

1. Calculate the four activity rates.

Machining rate	$fill in the blank 1 per machine hour
Engineering rate	$fill in the blank 2 per hour
Receiving rate	$fill in the blank 3 per order
Inspecting rate	$fill in the blank 4 per hour

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

	Unit cost
Regular	$fill in the blank 5 per unit
Deluxe	$fill in the blank 6 per unit

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

	Overhead Cost
Regular	$fill in the blank 7 per unit
Deluxe	$fill in the blank 8 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
Regular	$fill in the blank 9
Deluxe	$fill in the blank 10