Teldar Manufacturing Company is a diversified manufacturer that manufactures three products (M5, Z4, and I8) 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:

Activity

Activity Cost Pool

Production....................................264000

Setup..........................................96000

Material handling...........................9600

Inspection...................................50000

Product engineering........................150000

Total..........................................$569,60

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:

Each product requires 0.8 machine hour per unit.
Instructions
1. Determine the activity rate for each activity.
2. Determine the total and per-unit activity cost for all three products.
3. Why aren't the activity unit costs equal across all three products since they require the same machine time per unit?

Transcribed Image Text:

Number of Number of Machine Hours Number of Setups 60 120 220 400 Numberof Inspection Engineering Hours Parts Hours Units 450 300 M5 Z4 18 125 175 200 500 1,250 1,000 500 2,750 1,000 800 400 150 250 480 Total 2,200 1,000