Teldar Paper Company manufactures three products (computer paper, newsprint, and specialty paper) 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 .......... $ 640,000
Setup ............ 211,200
Moving ........... 35,100
Shipping ......... 131,625
Product engineering ...... 161,500
Total ........... $1,179,425
The activity bases identified for each activity are as follows:
Activity Activity Base _______
Production ........Machine hours
Setup ..........Number of setups
Moving .........Number of moves
Shipping ..........Number of customer orders
Product engineering ....Number of test runs
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 perunit?

Transcribed Image Text:

Number of Machine Number of Number of Customer Number of Setups Moves 400 165 605 1,170 Orders 660 210 885 1,755 Hours Test Runs Units Computer paper 1400 1,600 Specialty paper 000 4000 180 75 405 120 40 220 380 1,750 2,000 1,250 5,000 Newsprint Total