Question

Rundle Manufacturing produces two keyboards, one for laptop computers and the other for desktop computers. The production process is automated, and the company has found activity-based costing useful in assigning overhead costs to its products. The company has identified five major activities involved in producing the keyboards.

Activity	Allocation Base	Allocation Rate
Materials receiving & handling	Cost of material	2 % of material cost
Production setup	Number of setups	$	108.00	per setup
Assembly	Number of parts	$	6.00	per part
Quality inspection	Inspection time	$	2.00	per minute
Packing and shipping	Number of orders	$	11.00	per order

Activity measures for the two kinds of keyboards follow:

	Labor Cost			Material Cost			Number of Setups			Number of Parts			Inspection Time			Number of Orders
Laptops	$	1,230		$	6,400			32			48			7,100	min.		62
Desktops		1,120			7,200			15			23			4,600	min.		16

Required

1. Compute the cost per unit of laptop and desktop keyboards, assuming that Rundle made 300 units of each type of keyboard. (Round your answers to 2 decimal places.)

Cost Per Unit

Laptop Keyboards ( $ )

Desktop Keyboards ( $ )

Answer 1

Solution

	Activity Cost per unit
Laptops	$                 62.51
Desktops	$                 37.59

Working

Cost assigned to Laptops
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Materials receiving & handling	2%	6,400.00	$ 128.00
Production setup	$                               108.00	32.00	$ 3,456.00
Assembly	$                                   6.00	48.00	$ 288.00
Quality inspection	$                                   2.00	7,100.00	$ 14,200.00
Packing and shipping	$                                 11.00	62.00	$ 682.00
Total Overheads assigned	$ 18,754.00
Production	300.00
Overhead cost per unit	$ 62.51

.

Cost assigned to Desktops
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Materials receiving & handling	2%	7200	$ 144
Production setup	$                               108.00	15	$ 1,620
Assembly	$                                   6.00	23	$ 138
Quality inspection	$                                   2.00	4600	$ 9,200
Packing and shipping	$                                 11.00	16	$ 176
Total Overheads assigned	$             11,278.00
Production	300.00
Overhead cost per unit	$               37.59