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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	$30	per machine hour
Assembly	$12	per direct labor hour
Setup	$49	per setup
Inspecting	$27	per inspection
Production scheduling	$13	per production order
Purchasing	$10	per purchase order

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

Activity Base	Elliptical Machines		Treadmill
Machine hours	1,801		1,063
Direct labor hours	475		185
Setups	50		16
Inspections	688		413
Production orders	74		15
Purchase orders	193		118
Units produced	313		210

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

ANS:-
		Calculation of Total activity Cost and activity cost per unit
	In activity - base cosing system cost is calculated by deciding cost drivers and cost of each cost driver.
	For calulating cost No. of activity of cost driver is multiplied with cost each cost driver.
	Activity	Activity Base	Activity Rate $	Activity Base Usage		Activity Base Cost = A. Usage x A. Rate
				Elliptical Machines	Treadmill	Elliptical Machines	Treadmill
	Fabrication	Machine Hours	30	1801	1063	54,030	31,890
	Assembly	Direct labour Hours	12	475	185	5,700	2,220
	Setup	Set Ups	49	50	16	2,450	784
	Inspecting	Inspections	27	688	413	18,576	11,151
	Production scheduling	Production orders	13	74	15	962	195
	Purchasing	Purchase orders	10	193	118	1,930	1,180
		Total Activity Costs				83,648	47,420
		Unit Produced				313	210
		Activity Base Cost per Unit				267.25	225.81
		Total Activity Costs	Activity Base Cost per Unit
	Elliptical Machines	83,648.00	267.25
	Treadmill	47,420.00	225.81