Cornerstone Exercise 4.5 (Algorithmic)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 TotalUnits produced 80,000 240,000 ——
Prime costs $6,720,000 $27,360,000 $34,080,000
Machine hours 80,000 400,000 480,000
Engineering hours 500 4,500 5,000
Receiving orders 200 600 800
Inspection hours 800 1,600 2,400
Overhead costs: Machining $7,200,000Engineering 2,250,000Receiving 192,000Inspecting products 336,000
1. Calculate the four activity rates.
Machining rate$ per machine hourEngineering rate$ per hourReceiving rate$ per orderInspecting rate$ per hour
2. Calculate the unit costs using activity rates. Round your answers to the nearest cent.
Unit costBasic$ per unitAdvanced$ per unit
Calculate the overhead cost per unit. Round your answers to the nearest cent.
Overhead CostBasic$ per unitAdvanced$ 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 assignmentBasic$ Advanced$