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WRITTEN ASSIGNMENT UNIT 2 Computing Product Costs Using Activity-Based Costing: Petrov Company identified the following activities, estimated costs for each activity, and identified cost drivers for each activity for this coming year. (These are the first three steps of the activity-based costing model). Activity Cost Driver Production setup Number of production $ 60,000 runs 100 production runs Materials handling Yards of material purchased 140,000 10,000 yards purchased Quality control Number of inspections 80,000 800 inspections Total Estimated Estimated Annual Cost Annual Driver Activity Overhead Costs $280,000 The company produces two products, MX1 and MX2. Information about these products of the month of March follows: MX1 MX2 Direct materials cost per unit $20 $30 Direct labor costs per unit $15 $45 Overhead cost per unit ? ? Product cost per unit ? ? Units produced 1,000 units 700 units Actual cost driver activity levels for the month of March are as follows: MX1 MX2 3 6 Yards of materials purchased 550 230 Number of inspections 40 10 Number of production runs Required: a. Using the estimates for the year, compute the predetermined overhead rate for each activity (this is step 4 of the activity-based costing process). b. Using the activity rates calculated in requirement a and the actual cost driver activity levels shown for March, allocate overhead to the three products for the month of March (this is step 5 of the activity-based costing process). Template for part (a) Activity Cost Driver Estimated Overhead Costs Estimated Cost Driver Activity Production setups Number of production units $ [__________] [____] runs Materials handling Yards of materials $ [__________] [____] yards purchased Quality control Number of inspections $ [__________] [____] inspections Total $ [__________] Pre-determined Overhead Rate $[____] per production run $[____] per yard purchased $[____] per inspection Template for part (b) MX1 Pre-determined MX2 Cost Driver Activity Overhead Allocated Cost Driver Activity Overhead Allocated $[____] per production run [___] $ [__________] [___] $ [__________] $[____] per yard purchased [___] $ [__________] [___] $ [__________] $[____] per inspection [___] $ [__________] [___] $ [__________] Overhead Rate Total allocated