Question

Activity-Based Costing Hercules Industries manufactures two types of electrical power units, custom and standard, which involve four overhead activities—production setup, procurement, quality control, and materials management. An activity analysis of the overhead revealed the following estimated costs and activity bases for these activities: Activity Cost Activity Base Production setup $ 65,250 Number of setups Procurement 137,500 Number of purchase orders (PO) Quality control 175,000 Number of inspections Materials management 144,000 Number of components Total $521,750 The activity-base usage quantities for each product are as follows: Setups Purchase Orders Inspections Components Unit Volume Custom 200 1,100 2,200 450 1,000 Standard 250 150 300 350 1,000 Total 450 1,250 2,500 800 2,000 a. Determine an activity rate for each activity. Activity Rates Production Setup Procurement Quality Control Materials Management Activity cost $ $ $ $ Activity base Activity rate $ /setup $ /PO $ /inspection $ /component b. Assign activity costs to each product, and determine the unit activity cost using the activity rates from part (a). Round unit costs to the nearest cent. Custom Standard Setups Total $ $ Purchase Orders Total Inspections Total Components Total Total product cost $ $ Unit volume Unit cost $ $

Answer 1

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