Exercise 17.14 (Static) Allocating Activity Cost Pool (LO17-6, LO17-7)

Rachels Costume Creations has two product lines: machine-made costumes and hand-made costumes. The company assigns $96,000 in manufacturing overhead costs to two cost pools: power costs and inspection costs. Of this amount, the power cost pool has been assigned $38,400 and the inspection cost pool has been assigned $57,600. Additional information about each product line is provided below.

	Machine-Made			Hand-Made
Sales revenue	$	360,416		$	199,584
Direct labor and materials costs	$	144,000		$	120,000
Units produced and sold		66,736			16,632
Machine-hours		120,000			5,000
Square feet of production space		1,500			1,000
Material orders received		180			125
Quality control inspection hours		2,500			625

a. Allocate the manufacturing overhead from the activity cost pools to each product line.

b. Compute the cost per unit of machine-made costumes and hand-made costumes.

c. Compute the profitability per unit of each product line.