In: Accounting
Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:
1 |
Activity |
Activity Cost Pool |
2 |
Production |
$242,089.00 |
3 |
Setup |
88,425.00 |
4 |
Material handling |
9,253.00 |
5 |
Inspection |
49,623.00 |
6 |
Product engineering |
167,990.00 |
7 |
Total |
$557,380.00 |
The activity bases identified for each activity are as follows:
Activity |
Activity Base |
Production | Machine hours |
Setup | Number of setups |
Material handling | Number of parts |
Inspection | Number of inspection hours |
Product engineering | Number of engineering hours |
The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:
Machine | Number of | Number of | Number of | Number of | ||
Hours | Setups | Parts | Inspection Hours | Engineering Hours | Units | |
Alpha | 984 | 57 | 84 | 441 | 125 | 1,366 |
Beta | 847 | 126 | 158 | 284 | 191 | 991 |
Omega | 390 | 210 | 245 | 248 | 219 | 475 |
Total | 2,221 | 393 | 487 | 973 | 535 | 2,832 |
Each product requires 40 minutes per unit of machine time.
Complete the Activity Table for Alpha |
Alpha | |||||
Activity | Activity- | ||||
Base | Activity | Activity | |||
Usage | X | Rate | = | Cost | |
Production | __?_mh | __?_/mh | ? | ||
Setup | __?__setups | _?__/setup | ? | ||
Material handling | __?_parts | _?__/part | ? | ||
Inspection | __?_insp. hours | __?_/hour | ? | ||
Product Engineering | _?__eng. hours | /hour | |||
Total activity cost | |||||
Number of units | |||||
Activity cost per unit |
Complete the Activity Table for Beta |
Beta | |||||
Activity | Activity- | ||||
Base | Activity | Activity | |||
Usage | X | Rate | = | Cost | |
Production | |||||
Setup | |||||
Material handling | |||||
Inspection | |||||
Product Engineering | |||||
Total activity cost | |||||
Number of units | |||||
Activity cost per unit |
Complete the Activity Table for Omega |
Omega | |||||
Activity | Activity- | ||||
Base | Activity | Activity | |||
Usage | X | Rate | = | Cost | |
Production | |||||
Setup | |||||
Material handling | |||||
Inspection | |||||
Product Engineering | |||||
Total activity cost | |||||
Number of units | |||||
Activity cost per unit |