Question

1. Product Costs using Activity Rates

   Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:

   Activity	Activity Rate
   Fabrication	$21	per machine hour
   Assembly	$15	per direct labor hour
   Setup	$52	per setup
   Inspecting	$31	per inspection
   Production scheduling	$16	per production order
   Purchasing	$13	per purchase order

   The activity-base usage quantities and units produced for each product were as follows:

   Activity Base	Elliptical Machines		Treadmill
   Machine hours	1,659		979
   Direct labor hours	392		153
   Setups	49		15
   Inspections	628		377
   Production orders	68		14
   Purchase orders	203		124
   Units produced	307		206

   Use the activity rate and usage information to determine the total activity cost and activity cost per unit for each product. If required, round the per unit answers to the nearest cent.

   	Total Activity Cost	Activity Cost Per Unit
   Elliptical Machines	$	$
   Treadmill	$	$

Check My Work

Answer 1

	A	B	C= A*B
Particulars	Activity Rate	Activity Usage Quantities	Total Amount
Fabrication	21	1,659	34,839
Assembly	15	392	5,880
Setup	52	49	2,548
Inspection	31	628	19,468
Product Scheduling	16	68	1,088
Purchasing	13	203	2,639
Total Activity Costs			$66,462
÷ Number of Units Produced			307
Activity Cost per Unit of Elliptical Machine			$216.49

For Treadmill

	A	B	C=A*B
Particulars	Activity Rate	Activity Usage Quantities	Total Amount
Fabrication	21	979	20,559
Assembly	15	153	2,295
Setup	52	15	780
Inspection	31	377	11,687
Product Scheduling	16	14	224
Purchasing	13	124	1,612
Total Activity Costs			$37,157
÷ Number of Units			206
Activity Cost Per Unit of Treadmill			$180.37