Question

1. Quiz Company uses activity-based costing to determine product cost. The accounting department identified the following overhead activities, costs, and activity drivers for the coming year.

Activity	Estimated cost	Activity driver	Activity capacity
Setting up equipment	$120,000	Number of setups	300
Ordering materials	90,000	Number of orders	9,000
Maintaining machines	210,000	Machine hours	21,000
Total overhead	$420,000

The following actual results were collected for the production of Model X and Model Y during the year.

	Model X	Model Y
Units produced	8,000	4,000
Prime costs	$160,000	$100,000
Number of setups	200	100
Number of orders	3,000	6,000
Machine hours	12,000	9,000

Determine the unit cost of Model X.

2. During the most recent shift, Quiz Company produced 50 units in 10 hours. Determine the velocity for the production process.

a. 5 units per hour

b. 0.2 units per hour

c. 5 hours per unit

d. 0.2 hours per unit

Answer 1

1		Model X
	Prime costs	$160,000
	Setting up equipment	$80,000
	Ordering materials	$30,000
	Maintaining machines	$120,000
	Total cost	$390,000
	Units produced	8,000
	Unit cost	$48.75
	Working
	Activity	Estimated cost	Activity capacity	Activity rate
	Setting up equipment	$120,000	300	$400	per setups
	Ordering materials	$90,000	9,000	$10	per orders
	Maintaining machines	$210,000	21,000	$10	per Machine hours
	Total overhead	$420,000
2	a. 5 units per hour