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 $238,830.00 2 Production 3 Setup 96,585.00 Material handling 9,660.00 s Inspection 6 Product engineering Total 52,364.00 171,622.00 $569,061.00 7 The activity bases identified for each activity are as follows: Activity Production Setur Material handling Inspection Activity Base Machine hours Number of setups Number of parts Number of inspection hours Number of engineering hours Product engineering 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 901 62 73 428 134 1.245 Beta 773 117 156 313 191 918 Omega 421 232 254 247 213 520 Total 2,095 411 483 988 53B 2,683 Each product requires 40 minutes per unit of machine time. Activity Table - Alpha Complete the Activity Table for Alpha. 1. Determine the activity rate for each activity. Enter these rates in the Activity Rate columns. 2. Use the activity rates in (1) to determine the total and per-unit activity costs associated with Alpha *if required, round all per-unit amounts to the nearest cent. Alpha Activity Activity Base Activity Activity Usage Rate Cost Production S Setup S Material handling IS Inspection S Product Engineering s Total activity cost S Number of units Activity cost per unit $ Activity Table - Beta Complete the Activity Table for Beta. 1. Determine the activity rate for each activity. Enter these rates in the Activity Rate columns 2. Use the activity rates in (1) to determine the total and per-unit activity costs associated with Beta." *If required, round all per-unit amounts to the nearest cent. Beta Activity Activity Base Activity Activity Usage Rate Cost Production $ $ Setup $ Material handling $ Inspection $ - Product Engineering $ Total activity cost $ Number of units Activity cost per unit $ Activity Table - Omega Complete the Activity Table for Omega 1. Determine the activity rate for each activity. Enter these rates in the Activity Rate columns. 2. Use the activity rates in (1) to determine the total and per-unit activity costs associated with Omega.* *if required, round all per-unit amounts to the nearest cent. Omega Activity Activity Base Activity Activity Usage Rate Cost Production $ $ Setup $ 1 Material handling $ Inspection > $ > Product Engineering $ Total activity cost $ Number of units Activity cost per unit $ Final Question x 3. Why aren't the activity unit costs equal across all three products since they require the same machine time per unit? The difference is due to product cost distortions. The difference is because the products consume many activities in ratios different from the volume. The difference is due to machine inefficiencies
