Hallway Inc. manufactures a variety of patio chairs. The costing system was designed using an activity-based costing system. The following budgeted information is available at the beginning of the year: Quantity Selling price Units prime cost Product A 100,000 $900.00 $529.00 Product B 800,000 $750.00 $483.00 In addition, the following information was provided so that overhead costs could be assigned to each product: Activity Name Activity Driver Budgeted Activity Product A Product B Annual Annual Cost Activity Activity Setups Number of set ups Machining Machine hours $2,000,000 $80,000,000 Engineering Engineering hours $6,000,000 50,000 300 100,000 300,000 100,000 200 Packing Packing orders $1,000,000 100,000 400,000 Use the above information to answer the following questions. What is the activity-based overhead rate for Setups? HINT: remember to apply the entry rules. 4000 A/ What is the activity-based overhead rate for Machining? HINT: remember to apply the entry rules. 200 A/ What is the activity-based overhead rate for Engineering? HINT: remember to apply the entry rules. 40 A/ What is the activity-based overhead rate for Packing? HINT: remember to apply the entry rules. 2 Using the activity rates you have calculated, calculate the total overhead that would be allocated to all the units of Product A. Remember the entry rules and follow them! (Often, when students are marked wrong, it is because they are not following the rules!) A/ Using the activity rates you have calculated, calculate the total overhead that would be allocated to all the units of Product B. Remember the entry rules and follow them! Using the total overhead allocated to Product A, calculate the overhead allocated to each unit of Product A. HINT: Using the total overhead allocated to Product A, divide that by the number of units for Product A. A/ Using the total overhead allocated to Product B, calculate the overhead allocated to each unit of Product B. HINT: Using the total overhead allocated to Product B, divide that by the number of units for Product B. Calculate the total cost per unit for Product A, given the overhead per unit you just calculated. Then, using the Selling Price per unit for Product A, calculate the operating income per unit for Product A. The operating income per unit of Product A is $ Calculate the total cost per unit for Product B, given the overhead per unit you just calculated. Then, using the Selling Price per unit for Product B, calculate the operating income per unit for Product A. The operating income per unit of Product B is $