Product Costs using Activity Rates Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows: Activity Fabrication Activity Rate $23 per machine hour $11 per direct labor hour $53 per setup Assembly Setup Inspecting Production scheduling $12 per production order $9 per purchase order $25 per inspection Purchasing The activity-base usage quantities and units produced for each product were as follows: Activity Base Elliptical Machines Treadmill Machine hours 1,890 1,115 Direct labor hours 489 191 Setups 52 16 Inspections 670 402 Production orders 78 16 Purchase orders 208 127 Units produced 248 166