Question

Atlas Enterprises 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	$20	per machine hour
Assembly	$10	per direct labor hour
Setup	$55	per setup
Inspecting	$24	per inspection
Production scheduling	$11	per production order
Purchasing	$8	per purchase order

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

Activity Base	Elliptical Machines		Treadmill
Machine hours	1,747		1,031
Direct labor hours	385		150
Setups	56		17
Inspections	683		410
Production orders	72		14
Purchase orders	189		115
Units produced	313		210

Use the activity rate and usage information to calculate 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	$	$

Answer 1

Calculations of Total Activity Cost Elliptical Machine and Treadmill:-

Activity Base	Rate	Elliptical Machine	Treadmill
Machine Hours	$20 per machine hours	(1,747×$20)=$34,940	(1,031×$20=$20,620
Direct Labor hours	$10 per direct labor hours	(385×$10)=$3,850	(150×$10)=$1,500
Set ups	$55 per setup	(56×$55)=$3,080	(17×$55)=$935
Inspections	$24 per inspection	(683×$24)=$16,392	(410×$24)=$9,840
Production Orders	$11 per Production Order	(72×$11)=$792	(14×$11)=$154
Purchase Orders	$8 per Purchase order	(189×$8)=$1,512	(115×$8)=$920
Total Activity Cost		$60,566	$33,969

Computation of Activity Cost per Unit for Elliptical Machine:-

Elliptical Machine Activity Cost per unit=(Total Activity Cost/No. Of units produced)

=($60,566/313)

=$193.50 per Unit

Computation of Activity Cost per Unit for Treadmill:-

Treadmill Activity cost per Unit=(Total Activity Cost/No. Of units produced)

=($30,969/210)

=$147.47 per Unit