Question

Four Finger Appliance Company manufactures small kitchen appliances. The product line consists of blenders and toaster ovens. Four Finger Appliance presently uses the multiple production department factory overhead rate method. The factory overhead is as follows:

1	Assembly Department	$303,860.00
2	Test and Pack Department	222,580.00
3	Total	$526,440.00

The direct labor information for the production of 7,945 units of each product is as follows:

	Department
	Assembly	Test and Pack
Blender	840 dlh	2,525 dlh
Toaster oven	2,470	745
Total	3,310 dlh	3,270 dlh

Four Finger Appliance used direct labor hours to allocate production department factory overhead to products.

The management of Four Finger Appliance Company has asked you to use activity-based costing instead of direct labor hours to allocate factory overhead costs to the two products. You have determined that $72,160 of factory overhead from each of the production departments can be associated with setup activity ($144,320 in total). Company records indicate that blenders required 121 setups, while the toaster ovens required only 43 setups. Each product has a production volume of 7,945 units.

	Required:
	Complete the Activity Tables for blenders and toaster ovens. a. Determine the three activity rates (assembly, test and pack, and setup).* b. Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (a).* *If required, round all per-unit answers to the nearest cent.

Toaster Oven
Activity	Activity-
	Base		Activity		Activity
	Usage	X	Rate	=	Cost
Assembly activity	selector 1 dlh or setups		selector 2 /dlh or /setup
Test and pack activity	selector 3 dlh or setups		selector 4 /dlh or /setup
Setup activity	selector 5 dlh or setups		selector 6 /dlh or /setup
Total
÷ Units				÷
Factory overhead cost per unit

Blender
Activity	Activity-
	Base		Activity		Activity
	Usage	X	Rate	=	Cost
Assembly activity	selector 1 dlh setups		selector 2 /dlh /setup
Test and pack activity	selector 3 dlh setups		selector 4 /dlh /setup
Setup activity	selector 5 dlh setups		selector 6 /dlh /setup
Total
÷ Units				÷
Factory overhead cost per unit

Answer 1

Calculation of Activity Rate
Activity	Activity Cost(Col 1)	Cost Driver(Col 2)	Activity Rate(Col 1 / Col.2)
Assembly Activity	$               2,31,700	3310 dlh	$                             70.00	Per direct labor hours
Test and Pack Activity	$               1,50,420	3270 dlh	$                             46.00	Per direct labor hours
Setup Activity	$               1,44,320	164 setups	$                           880.00	Per setups
Allocation of Activity Cost for Blender
	Base Usage	Activity Rate	Activity Cost
Assembly Activity	840	$                                  70.00	$                      58,800.00
Test and Pack Activity	2525	$                                  46.00	$                   1,16,150.00
Setup Activity	121	$                                880.00	$                   1,06,480.00
Total Activity Costs			$                   2,81,430.00
No. of units			7945	units
Activity Costs per unit($281,430/7945)			$                             35.42	per unit
Allocation of Activity Cost for Toaster Oven
	Base Usage	Activity Rate	Activity Cost
Assembly Activity	2470	$                                  70.00	$                   1,72,900.00
Test and Pack Activity	745	$                                  46.00	$                      34,270.00
Setup Activity	43	$                                880.00	$                      37,840.00
Total Activity Costs			$                   2,45,010.00
No. of units			7945	units
Activity Costs per unit($281,430/7945)			$                             30.84	per unit