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:

ActivityActivity Rate

Fabrication$20per machine hour

Assembly$10per direct labor hour

Setup$50per setup

Inspecting$23per inspection

Production scheduling$11per production order

Purchasing$8per purchase order

The activity-base usage quantities and units produced for each product were as follows:

Activity BaseElliptical MachinesTreadmill

Machine hours1,756 1,036

Direct labor hours416 162

Setups61 19

Inspections608 365

Production orders77 15

Purchase orders201 123

Units produced306 205

Use the activity rate and usage information to determine the total activity cost and activity cost per unit for each product. If required, round the per unit answers to the nearest cent.

Total Activity CostActivity Cost Per Unit

Elliptical Machines$$

Treadmill$$