Question

Roberts Company produces two weed eaters: basic and advanced. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below.

		Basic		Advanced		Total
Units produced		110,000		330,000		—
Prime costs		$8,800,000		$34,980,000		$43,780,000
Machine hours		110,000		550,000		660,000
Engineering hours		500		4,500		5,000
Receiving orders		400		1,200		1,600
Inspection hours		700		1,400		2,100
Overhead costs:
Machining		$9,240,000
Engineering		2,300,000
Receiving		480,000
Inspecting products		399,000

Required:

1. Calculate the four activity rates.

Machining rate	$ per machine hour
Engineering rate	$ per hour
Receiving rate	$ per order
Inspecting rate	$ per hour

2. Calculate the unit costs using activity rates. Round your answers to the nearest cent.

	Unit cost
Basic	$ per unit
Advanced	$ per unit

Calculate the overhead cost per unit. Round your answers to the nearest cent.

	Overhead Cost
Basic	$ per unit
Advanced	$ per unit

3. If consumption ratios instead of activity rates were used to assign costs instead of activity rates, show the cost assignment for the inspection activity.

	Cost assignment
Basic	$
Advanced	$

Answer 1

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Roberts Company
Answer 1		A	B	C=A/B
Activity cost pool	Activity Measure	Total cost	Activity usage	ABC rates
Machining	Machine Hours	9,240,000.00	660,000.00	14.00
Engineering	Engineering Hours	2,300,000.00	5,000.00	460.00
Receiving	Receiving Orders	480,000.00	1,600.00	300.00
Inspecting Products	Inspection Hours	399,000.00	2,100.00	190.00
Total Cost		12,419,000.00
Answer 2
Basic		See C	D	E=C*D
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned
Machining	Machine Hours	14.00	110,000.00	1,540,000.00
Engineering	Engineering Hours	460.00	500.00	230,000.00
Receiving	Receiving Orders	300.00	400.00	120,000.00
Inspecting Products	Inspection Hours	190.00	700.00	133,000.00
Total Cost assigned				2,023,000.00
Advanced		See C	F	G=C*F
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned
Machining	Machine Hours	14.00	550,000.00	7,700,000.00
Engineering	Engineering Hours	460.00	4,500.00	2,070,000.00
Receiving	Receiving Orders	300.00	1,200.00	360,000.00
Inspecting Products	Inspection Hours	190.00	1,400.00	266,000.00
Total Cost assigned				10,396,000.00

Product cost per unit	Basic	Advanced	Note
Prime costs	880,000.00	34,980,000.00
Overhead	2,023,000.00	10,396,000.00	H= See E, G
Total product cost	2,903,000.00	45,376,000.00	I
Number of units	110,000.00	310,000.00	J
Product cost per unit	26.39	146.37	K=I/J
Answer 2	Basic	Advanced
Overhead assigned	2,023,000.00	10,396,000.00	See H
Number of units	110,000.00	330,000.00	See I
Overhead cost per unit	18.39	31.50	L=H/I

Answer 3	Basic	Advanced	Total	Note
Prime costs	880,000.00	34,980,000.00	35,860,000.00	M
Inspecting Products			399,000.00	N
Company wide OH Rate			1.11%	O=N/M
Cost assignment for Inspecting Products	9,791.41	389,208.59	399,000.00	P=M*O