Question

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	Activity Pool Cost			Activity Base
Procurement		$12,600		Number of purchase orders
Scheduling		90,000		Number of production orders
Materials handling		11,000		Number of moves
Product development		50,000		Number of engineering changes
Total cost		$163,600

The estimated activity-base usage and unit information for two product lines was determined as follows:

		Number of Purchase Orders			Number of Production Orders			Number of Moves			Number of Engineering Change Orders			Units
Ovens			400			800			300			80			1,000
Refrigerators			300			400			200			120			500
	Totals		700			1,200			500			200			1,500

a. Determine the activity rate for each activity cost pool.

Procurement (per purchase order)	$
Scheduling (per production order)	$
Materials handling (per move)	$
Product development (per engineering change order)	$

b. Determine the activity-based cost per unit of each product. Round the per unit rates to the nearest cent.

Ovens	$ per unit
Refrigerators	$ per unit

Please show calculations

Answer 1

a.)	Activity rate for each activity pool	Amount $
	Procurement (per purchase order)	18	=12600/700
	Scheduling (per production order)	75	=90000/1200
	Materials handling (per move)	22	=11000/500
	Product development (per engineering change order)	250	=50000/200
b.)			Amount $
		Ovens	Refrigerators
	Procurement	7,200	5,400
	Scheduling	60,000	30,000
	Materials handling	6,600	4,400
	Product development	20,000	30,000
	Total activity cost allocated	93,800	69,800
	Activity based cost per unit of each product
	Ovens	$ 93.80	=93800/1000
	Refrigerators	$ 139.60	=69800/500

Working:
		Amount $
	Ovens	Refrigerators
Procurement	=18*400	=18*300
Scheduling	=75*800	=75*400
Materials handling	=22*300	=22*200
Product development	=250*80	=250*120
Total activity cost allocated	93,800	69,800