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Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the

Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller 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

$237,552.00

3

Setup

93,660.00

4

Material handling

10,500.00

5

Inspection

53,185.00

6

Product engineering

156,755.00

7

Total

$551,652.00

The activity bases identified for each activity are as follows:

Activity

Activity Base

Production Machine hours
Setup Number of setups
Material handling Number of parts
Inspection Number of inspection hours
Product engineering Number of engineering hours

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

Machine Number of Number of Number of Number of
Hours Setups Parts Inspection Hours Engineering Hours Units
Alpha 1,000 62 82 458 133 1,137
Beta 733 121 147 270 187 1,057
Omega 388 237 271 239 215 474
Total 2,121 420 500 967 535 2,668

Each product requires 40 minutes per unit of machine time.

Required:
Complete the Activity Tables for Alpha, Beta and Omega.
1. Determine the activity rate for each activity.*
2. Use the activity rates in (1) to determine the total and per-unit activity costs associated with all three products.*
3. Why arent the activity unit costs equal across all three products since they require the same machine time per unit?
*If required, round all per-unit amounts to the nearest cent.

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