Question

Taylor Corporation produces two models of their leather brief cases: deluxe and standard. The four activities and four drivers are as follows:

			Hours
Activities:	Cost	Driver	Deluxe	Standard	Total
Cutting	$ 96,000	Cutting hours	2,200	1,300	3,500
Assembling	42,000	Assembly hours	1,150	980	2,130
Inspecting	15,000	Inspection hours	800	500	1,300
Reworking	8,000	Rework hours	20	35	55

Required:

Calculate the consumption ratios for the four drivers, rounding to 2 decimal places.

Calculate the activity rates that would be used to assign costs to each product. Round your answer to two decimal places.

Calculate the unit cost assuming that 500 deluxe models were produced and 700 standard models were produced, rounded to the nearest cent.

Answer 1

1)	CONSUMPTION RATIOS:
				Hours		CONSUMPTION RATIO
	Activities:	Driver	Deluxe	Standard	Total	Deluxe	Standard
	Cutting	Cutting hours	2,200	1,300	3,500	0.63	0.37
	Assembling	Assembly hours	1,150	980	2,130	0.54	0.46
	Inspecting	Inspection hours	800	500	1,300	0.62	0.38
	Reworking	Rework hours	20	35	55	0.36	0.64
	Note: Consumption ratio for Cutting:
	For deluxe = 2200/3500 = 0.63; for standard = 1300/3500 = 0.37
	For other activities, ratios have been worked out as above.
2)	ACTIVITY RATES:
					Hours
	Activities:	Cost	Driver	Deluxe	Standard	Total	Activity Rates = Cost/ Total Hours
	Cutting	96000	Cutting hours	2,200	1,300	3,500	27.43
	Assembling	42000	Assembly hours	1,150	980	2,130	19.72
	Inspecting	15000	Inspection hours	800	500	1,300	11.54
	Reworking	8000	Rework hours	20	35	55	145.45
3)	UNIT COST:
	Units produced			500	700
	Cutting			60343	35657	96000
	Assembling			22676	19324	42000
	Inspecting			9231	5769	15000
	Reworking			2909	5091	8000
	Total cost			95159	65841	161000
	Cost per unit			$               190.32	$                94.06