Question

Product Costs using Activity Rates

Atlas Enterprises Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:

Activity	Activity Rate
Fabrication	$21	per machine hour
Assembly	$9	per direct labor hour
Setup	$52	per setup
Inspecting	$20	per inspection
Production scheduling	$10	per production order
Purchasing	$7	per purchase order

The activity-base usage quantities and units produced for each product were as follows:

Activity Base	Elliptical Machines		Treadmill
Machine hours	1,832		1,081
Direct labor hours	380		148
Setups	46		14
Inspections	657		394
Production orders	65		13
Purchase orders	213		130
Units produced	307		206

Use the activity rate and usage information to calculate the total activity cost and activity cost per unit for each product. If required, round the per unit answers to the nearest cent.

	Total Activity Cost	Activity Cost Per Unit
Elliptical Machines	$	$
Treadmill	$	$

Answer 1

	Total Activity cost	Activity Cost per unit
Elliptical Machines	$ 59,565.00	$ 194.02
Treadmil	$            33,681.00	$             163.50

Working

Cost assigned to Elliptical Machines
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Fabrication	$                     21.00	1832	$         38,472.00
Assembly	$                       9.00	380	$           3,420.00
Setup	$                     52.00	46	$           2,392.00
Inspection	$                     20.00	657	$ 13,140.00
Production scheduling	$                     10.00	65	$ 650.00
Purchasing	$                       7.00	213	$ 1,491.00
Total Overheads assigned			$         59,565.00
Production			307.00
Overhead cost per unit			$ 194.02

.

Cost assigned to Treadmil
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Fabrication	$                     21.00	1081	$         22,701.00
Assembly	$                       9.00	148	$           1,332.00
Setup	$                     52.00	14	$              728.00
Inspection	$                     20.00	394	$           7,880.00
Production scheduling	$                     10.00	13	$              130.00
Purchasing	$                       7.00	130	$ 910
Total Overheads assigned			$         33,681.00
Production			206.00
Overhead cost per unit			$              163.50