Question

EX 18-12 Activity Cost Pools, Activity Rates, and Product Costs Using Activity-Based Costing Obj. 4 Caldwell Home Appliances Inc. is estimating the activity cost associated with producing ovens and refrigerators. The indirect labor can be traced into four separate activity pools, based on time records provided by the employees. The budgeted activity cost and activity-base information are provided as follows: Activity Pool Cost Activity Activity Base Procurement Scheduling Materials handling Product development Total cost $ 12,600 90,000 11,000 50,000 $163,600 Number of purchase orders Number of production orders Number of moves Number of engineering changes The estimated activity-base usage and unit information for two product lines was determined as follows: Number of Engineering Change Orders Number of Purchase Orders 400 300 700 Number of Production Orders 800 400 1,200 Ovens Refrigerators Totals Number of Moves 300 200 500 80 120 Units 1,000 500 1,500 a. Determine the activity rate for each activity cost pool. b. Determine the activity-based cost per unit of each product. Answer

Answer 1

a Schedule Showing computation of activity based overhead rates (per cost driver). (A) Activity cost pool (B) Total Activity Base (A)/(B) Activity Rate Factory Overhead Procurement Scheduling Material handling Product development 12,600 90,000 11,000 50,000 163,600 700 Purchase order 1200 Producion order 500 moves 200 ECOS $ $ $ $ 18.00 per Purchase order 75.00 per Producion order 22.00 per move 250.00 per ECO $ нь Schedule showing assigning of each product based on the use of cost driver Activity cost pool (A) Ovens (B) Refrigerators (B) (A) x (B) (A) x (B) Procurement Scheduling Material handling Product development Total Number of units Activity Cost Per Unit Activity base usage 400 $ 800 $ 300 $ 80 $ Activity Rate 18.00 75.00 22.00 250.00 Activity cost $ 7,200 $ 60,000 $ 6,600 $ 20,000 93,800 1000 $ 93.80 (A) Activity base usage 300 $ 400 $ 200 $ 120 $ Activity Rate Activity cost 18.00 $ 5,400 75.00 $ 30,000 22.00 $ 4,400 250.00 $ 30,000 69,800 500 $ 139.60 (b) (a)/(b)