Question

Product Costs using Activity Rates

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	$23	per machine hour
Assembly	$13	per direct labor hour
Setup	$58	per setup
Inspecting	$24	per inspection
Production scheduling	$14	per production order
Purchasing	$11	per purchase order

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

Activity Base	Elliptical Machines		Treadmill
Machine hours	1,665		982
Direct labor hours	392		153
Setups	61		19
Inspections	627		376
Production orders	64		13
Purchase orders	173		106
Units produced	261		175

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

The correct answer is :

	Total Activity Cost	Activity Cost Per Unit
Elliptical Machines	$ 64,776	$ 248.18
Treadmill	$ 36,049	$ 205.99

Notes:

Activity	Activity Rate		Elliptical Machines Activity		Activity * Activity Rate
Fabrication	23	per machine hour	1665	Machine Hours	38,295
Assembly	13	per direct labor hour	392	Direct Labor Hours	5,096
Setup	58	per setup	61	Setups	3,538
Inspecting	24	per inspection	627	Inspections	15,048
Production scheduling	14	per production order	64	Production Order	896
Purchasing	11	per purchase order	173	Purchase Orders	1,903
			Total Activity Cost		64,776
			Total Units		261
			Activity Cost Per Unit (Total Activity Cost / Total Units)		248.18

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Activity	Activity Rate		TreadMill Activity		Activity * Activity Rate
Fabrication	23	per machine hour	982	Machine Hours	22,586
Assembly	13	per direct labor hour	153	Direct Labor Hours	1,989
Setup	58	per setup	19	Setups	1,102
Inspecting	24	per inspection	376	Inspections	9,024
Production scheduling	14	per production order	13	Production Order	182
Purchasing	11	per purchase order	106	Purchase Orders	1,166
			Total Activity Cost		36,049
			Total Units		175
			Activity Cost Per Unit (Total Activity Cost / Total Units)		205.99