Mello Manufacturing Comapany is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the conroller to conduct an activity based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows.

1 Activity Activity Cost Pool 2 Production $251,598.00 3 Setup 92,035.00 4 Material handling 10,736.00 5 Inspection 49,833.00 6 Product engineering 136,230.00 7 Total $540,432.00 ctions Activity Table - Alpha Alpha Activity Activity Activity Base Activity Cost Rate Usage > S $ Production S Setup parts > S Material handling insp. hours 5 Inspection eng hours $ $ Product Engineering mh S Total activity cost setups Number of units $ Activity cost per unit Activity Table - Alpha Alpha Activity Activity Base Activity Activity Usage Rate Cost Production S $ > Setup $ part Material handling en /hour Inspection > s Imh Product Engineering 5 setup Total activity cost s Number of units Activity cost per unit Beta Activity Activity Activity Activity Base Rate Cost Usage X $ > > Production Setup > Material handling $ $ $ Inspection > $ Product Engineering s Total activity cost Number of units S Activity cost per unit tructions Activity Table - Omega Omega Activity Activity Activity Base Activity 11 Rate Cost X Usage $ $ Production $ Setup $ Material handling $ Inspection $ Product Engineering $ Total activity cost Number of units S Activity cost per una 3. Why aren' the activity unit costs equal across all three products since they require the same machine timo per unit? The difference is due to machine inefficiencies The difference is due to product cost distortions. P The difference is because the products consume many activities in ratios different from the volume S M 1 Activity Activity Cost Pool 2 Production $251,598.00 3 Setup 92,035.00 4 Material handling 10,736.00 5 Inspection 49,833.00 6 Product engineering 136,230.00 7 Total $540,432.00 ctions Activity Table - Alpha Alpha Activity Activity Activity Base Activity Cost Rate Usage > S $ Production S Setup parts > S Material handling insp. hours 5 Inspection eng hours $ $ Product Engineering mh S Total activity cost setups Number of units $ Activity cost per unit Activity Table - Alpha Alpha Activity Activity Base Activity Activity Usage Rate Cost Production S $ > Setup $ part Material handling en /hour Inspection > s Imh Product Engineering 5 setup Total activity cost s Number of units Activity cost per unit Beta Activity Activity Activity Activity Base Rate Cost Usage X $ > > Production Setup > Material handling $ $ $ Inspection > $ Product Engineering s Total activity cost Number of units S Activity cost per unit tructions Activity Table - Omega Omega Activity Activity Activity Base Activity 11 Rate Cost X Usage $ $ Production $ Setup $ Material handling $ Inspection $ Product Engineering $ Total activity cost Number of units S Activity cost per una 3. Why aren' the activity unit costs equal across all three products since they require the same machine timo per unit? The difference is due to machine inefficiencies The difference is due to product cost distortions. P The difference is because the products consume many activities in ratios different from the volume S M