Question

Exercise 7-8 Wieters Industries manufactures several products including a basic case for a popular smartphone. The company is considering adopting an activity-based costing approach for setting its budget. The company's production activities, budgeted activity costs, and cost drivers for the coming year are as follows. Cost Driver Cost Driver Activity Activity Overhead $ Quantity # of setups Machine setup $200,000 800 #of quality tests Inspection 120,000 400 Materials receiving # of purchase orders 252,000 1,800 The budgeted data for smartphone case production are as follows Direct materials $2.50 per unit Direct labor $0.54 per unit Number of setups 92 Number of quality tests 400 Number of purchase orders 50 Production 15,000 units

Answer 1

1) Activity rate

Machine setup (200000/800)	250 per setup
Inspection (120000/400)	300 per test
Material receiving (252000/1800)	140 per order

2) Calculate activity based unit cost

Machine setup	23000
Inspection	120000
Material receiving	7000
Total Overhead	150000
Overhead cost per unit	10
Direct material	2.50
Direct labor	0.54
Unit cost	13.04