Question

In: Accounting

Rundle Manufacturing produces two keyboards, one for laptop computers and the other for desktop computers. The...

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 ( $ )

Solutions

Expert Solution

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

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