Question

Caldwell Home Appliances Inc. is estimating the activity cost associated with producing ovens and refrigerators. The indirect labor can be traced into four separate activity pools, based on time records provided by the employees. The budgeted activity cost and activity-base information are provided as follows:

1	Activity	Activity Pool Cost	Activity Base
2	Procurement	$82,012.00	Number of purchase orders
3	Scheduling	5,112.00	Number of production orders
4	Materials handling	14,212.00	Number of moves
5	Product development	5,670.00	Number of engineering changes
6	Total cost	$107,006.00

The estimated activity-base usage and unit information for two product lines was determined as follows:

	Number of
	Purchase Orders	Production Orders	Moves	Engineering Change Orders	Units
Ovens	465	141	210	58	777
Refrigerators	242	72	208	32	541
Totals	707	213	418	90	1,318

	Required:
	Complete the Activity Tables for ovens and refrigerators. a. Determine the activity rate for each activity cost pool. Enter these rates in the Activity Rate columns. b. Use the activity rates in (a) to determine the activity-based cost per unit of each product. Round the per-unit rates to the nearest cent.

Answer 1

--Requirement 'a'

				Total Activity base			Activity rate
	Activity	Activity Pool Cost	Activity Base	Ovens	Refrigerators	Total
2	Procurement	$82,012	Number of purchase orders	465	242	707	$116	per Number of purchase orders
3	Scheduling	$5,112	Number of production orders	141	72	213	$24	per Number of production orders
4	Materials handling	$14,212	Number of moves	210	208	418	$34	per Number of moves
5	Product development	$5,670	Number of engineering changes	58	32	90	$63	per Number of engineering changes
6	Total cost	$107,006

--Requirement 'b' with workings

	Ovens		Refrigerators
	Cost allocated	Working	Cost allocated	Working
Procurement	$53,940	465 Number of purchase orders x $ 116	$28,072	242 Number of purchase orders x $ 116
Scheduling	$3,384	141 Number of production orders x $ 24	$1,728	72 Number of production orders x $ 24
Materials handling	$7,140	210 Number of moves x $ 34	$7,072	208 Number of moves x $ 34
Product development	$3,654	58 Number of engineering changes x $ 63	$2,016	32 Number of engineering changes x $ 63
Total Overhead cost allocated	$                                                                        68,118		$                                                                       38,888
Total units	777		541
Activity based cost per unit	$                                                                          87.67		$                                                                         71.88