Question

Scenario IV: Goodmark Company produces two types of birthday cards: scented and regular. Expected product data for the coming year are given below. Overhead costs are identified by activity.

	Scented Cards	Regular Cards	Total
Units produced	20,000	200,000	-
Prime costs	$160,000	$1,500,000	$1,660,000
Direct labor hours	20,000	160,000	180,000
Number of setups	60	40	100
Machine hours	10,000	80,000	90,000
Inspection hours	2,000	16,000	18,000
Number of moves	180	120	300

Overhead costs:

Setting up equipment	$240,000
Moving materials	120,000
Machining	200,000
Inspecting products	160,000

Required:

1.	Answer the following questions:
a.	Calculate the activity consumption ratios for Scented cards (round to two decimal places).
	Setups: Moving materials: Machining: Inspection:
b.	If only one rate based on direct labor hours were used to assign overhead, Scented Cards would receive about percent of the total overhead. Upon comparing this overhead assignment with the activity consumption ratios calculated in part a, it is clear that a plantwide rate would significantly understate the activity-based cost assignments.
2.	Calculate the four activity rates (round to the nearest cent).
	Setups: per setup Moving materials: per move Machining: per machine hour Inspection: per inspection hour
3.	Calculate the total unit costs using activity rates to assign overhead (round to the nearest cent).
	Scented: $ Regular: $

Answer 1