Question

Activity-Based Product Costing Roberts Company produces two weed eaters: basic and advanced. The company has four...

Activity-Based Product Costing

Roberts Company produces two weed eaters: basic and advanced. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below.

Basic      Advanced      Total
Units produced         90,000         270,000        
Prime costs         $6,480,000         $30,240,000         $36,720,000
Machine hours         90,000         450,000         540,000
Engineering hours         400         3,600         4,000
Receiving orders         500         1,500         2,000
Inspection hours         900         1,800         2,700
       
Overhead costs:        
Machining         $5,940,000
Engineering         2,400,000
Receiving         400,000
Inspecting products         513,000

Required:

1. Calculate the four activity rates.

Machining rate $___ per machine hour
Engineering rate $ ___per hour
Receiving rate $ ___per order
Inspecting rate $__ per hour

2. Calculate the unit costs using activity rates. Round your answers to the nearest cent.

Unit cost
Basic $ ___per unit
Advanced $___ per unit

Calculate the overhead cost per unit. Round your answers to the nearest cent.

Overhead Cost
Basic $ ____per unit
Advanced $____ per unit

3. If consumption ratios instead of activity rates were used to assign costs instead of activity rates, show the cost assignment for the inspection activity.

Cost assignment
Basic $
Advanced $
0 0
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Answer #1
1)
Total Overheads Total Activity Rate Per Activity
Machining 59400000 $                           5,40,000 Machine Hours $                       110 Per Machine Hour
Engineering 24,00,000 $                                 4,000 Machine hours $                       600 Per hour
Receiving 4,00,000 $                                 2,000 Receiving orders $                       200 Per Oredr
Inspecting products 5,13,000 $                                 2,700 Inspection hours $                       190 Per Hour
2) Calculation of the unit costs using activity rates.
Basic Advance
Prime Cost $                              72.00 $                              112.00
Overhead Cost
Machining $                            110.00 $                              183.33
(90000/90000*$110) (450000/270000*110)
Engineering 2.67 8
(400/90000*600) (3600/270000*$600)
Receiving $                                1.11 $                                   1.11
(500/90000*200) (1500/270000*200)
Inspecting products $                                1.90 $                                   1.27
(900/90000*190) (1800/270000*190)
total overhead cost $                            115.68 $                              193.71
Unit Cost $                            187.68 $                              305.71
(Prime Cost + Overhead Cost)
Overhead Cost Per unit $                            115.68 $                              193.71
3) cost assignment for the inspection activity
Basic = $513000/2700*900 $                        1,71,000
Advance = $513000/27000*1800 $                        3,42,000
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