Juguette has decided to implement ABC. Expected product-costing data are given below: Robots Race Cars Total...

Juguette has decided to implement ABC. Expected product-costing data are given below:

	Robots	Race Cars	Total
Units produced	50,000	250,000
Prime costs	$200,000	$750,000	$950,000
Machine hours	20,000	10,000	30,000
Number of setups	25	75	100
Number of moves	140	210	350
Inspection hours	1,200	2,800	4,000

Overhead costs:
Machining	$150,000
Setting up	80,000
Moving materials	70,000
Inspecting products	50,000

Calculate the four activity rates:

Machining:

Setting up:

Moving materials:

Inspecting products:

Calculate the unit costs using activity rates.

Solutions

Expert Solution

Under activity rates method, the cost are allocated on the basis of each activity by first calculating the activity rate and then multiplying the rate with the activity of the respective product.

Computation of overheads using activity rates will be:

1. Machining rate= Total Machining Overhead Costs/Total Machine hours

Therefore, Machining rate = $150,000/30,000 hours = $5 per hour

2. Setting up rate= Total Setting Up Costs/Total no of set ups

Therefore, Setting up rate = $80,000/100 set ups = $800 per Setup

3. Moving Material rate= Total Moving Material Costs/Total no of moves

Therefore, Moving Material rate = $70,000/350 Moves = $200 per moves

4. Inspecting rate= Total Inspecting Costs/Total Inspection Hours

Therefore, Inspecting rate = $50,000/4,000 Hours = $12.5 per inspection hours

Computation of unit costs using activity rates:

ekkarill92 answered 1 year ago

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