In: Accounting
Activity-Based Product Costing 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 120,000 360,000 ------ Prime costs $9,840,000 $40,320,000 $50,160,000 Machine hours 120,000 600,000 720,000 Engineering hours 400 3,600 4,000 Receiving orders 200 600 800 Inspection hours 900 1,800 2,700 Overhead costs: Machining $6,480,000 Engineering 1,840,000 Receiving 192,000 Inspecting products 459,000 Required: 1. Calculate the four activity rates. Machining rate $ 10 per machine hour Engineering rate $ 420 per hour Receiving rate $ 370 per order Inspecting rate $ 120 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. What if consumption ratios instead of activity rates were used to assigned costs? Show the cost assignment for the inspection activity. Cost assignment Basic $ Advanced $
Ques 1 | ||||
Machining | engg | receiving | inspecting products | |
costs(a) | 6480000 | 1840000 | 192000 | 459000 |
no. of activity(b) | 720000 | 4000 | 800 | 2700 |
rate(a/b) | 9 | 460 | 240 | 170 |
Ques 2 | ||||
Basic | Advanced | |||
Prime costs | 9840000 | 40320000 | ||
Overhead costs | ||||
machining | ||||
9*120000 | 1080000 | |||
9*600000 | 5400000 | |||
engineering | ||||
460*400 | 184000 | |||
460*3600 | 1656000 | |||
receiving | ||||
240*200 | 48000 | |||
240*600 | 144000 | |||
inspecting | ||||
170*900 | 153000 | |||
170*1800 | 306000 | |||
total manufacturing costs | 11305000 | 47826000 | ||
units of production | 120000 | 360000 | ||
unit cost | $ 94.21 | $ 132.85 | ||
total unit cost | $ 94.21 | $ 132.85 | ||
Prime cost per unit | $ 82.00 | $ 112.00 | ||
overhead cost per unit | $ 12.21 | $ 20.85 | ||
Ques 3 | ||||
Basic | Advanced | |||
inspecting activity | 900 | 1800 | ||
total activity | 2700 | |||
% | 33% | 67% | ||
total costs | 459000 | |||
allocated | 153000 | 306000 | ||
this same as with using activity rates |