Activity-Based Product Costing Roberts Company produces two weed eaters: basic a
ID: 2337971 • Letter: A
Question
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.
Required:
1. Calculate the four activity rates.
2. Calculate the unit costs using activity rates. Round your answers to the nearest cent.
Calculate the overhead cost per unit. Round your answers to the nearest cent.
3. If consumption ratios instead of activity rates were used to assign costs instead of activity rates, show the cost assignment for the inspection activity.
Basic Advanced Total Units produced 130,000 390,000 — Prime costs $9,620,000 $41,340,000 $50,960,000 Machine hours 130,000 650,000 780,000 Engineering hours 300 2,700 3,000 Receiving orders 200 600 800 Inspection hours 1,000 2,000 3,000 Overhead costs: Machining $7,800,000 Engineering 1,410,000 Receiving 200,000 Inspecting products 390,000Explanation / Answer
Solution 1:
Solution 2:
Solution 3:
Cost assignment for inspection activity using consumption ratios:
Consumption ration between basic and advance for inspection hours = 1000:2000 = 1:2
Inspection cost allocated to Basic = $390,000*1/3 = $130,000
Inspection cost allocated to Advance = $390,000*2/3 = $260,000
Determination of activity rate for each activity & allocation of overhead Activity Estimated Overhead Cost Activity Base Usage of Activity Base Activity Rate Machining $7,800,000.00 Machine hours 780000 $10.00 Per machine hour Engineering $1,410,000.00 Engineering hours 3000 $470.00 Per Engineering hour Receiving $200,000.00 Receiving Orders 800 $250.00 Per Order Inspecting Products $390,000.00 Inspection hours 3000 $130.00 Per Inspection hours Total $9,800,000.00Related Questions
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