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Kitchen Wares, Inc., is estimating the activity cost associated with producing o

ID: 2449219 • Letter: K

Question

Kitchen Wares, Inc., is estimating the activity cost associated with producing ovens and refrigerators. The indirect labor can be traced into four separate activity pools, based on time records provided by the employees. The budgeted activity cost and activity-base information are provided as follows:

The estimated activity-base usage and unit information for Top Chef's two product lines was determined from corporate records as follows:

a. Determine the activity rate for each activity cost pool. If required, round your answers to the nearest dollar.

b. Determine the activity-based cost per unit of each product. Round your answers to the nearest cent.

Activity Activity Pool Cost Activity Base Procurement $162,560 Number of purchase orders Scheduling 8,640 Number of production orders Materials handling 27,060 Number of moves Product development 29,600 Number of engineering changes Total cost $227,860

Explanation / Answer

a.

Activity

Activity Pool Cost

Basis

Total Units as per basis

Activity rate per activity

Procurement

$ 162,560

Number of Purchase Orders

1,280

$ 127

Scheduling

$ 8,640

Number of Production Orders

320

$ 27

Material Handling

$ 27,060

Number of moves

820

$ 33

Product Development

$ 29,600

Number of engineering changes

200

$ 148

Total Cost

$ 227,860

b.

Activity

Activity Pool Cost

Basis

Total Units as per basis

Activity rate per activity

Ovens

Refrigerators

Procurement

$ 162,560

Number of Purchase Orders

1,280

$ 127

=127 x 660

= $83,820

=127 x 620

= $78,840

Scheduling

$ 8,640

Number of Production Orders

320

$ 27

=27 x 210

= $5,670

=27 x 110

= $2,970

Material Handling

$ 27,060

Number of moves

820

$ 33

=33 x 480

= $15,840

=33 x 340

= $11,220

Product Development

$ 29,600

Number of engineering changes

200

$ 148

=148 x 140

= $20,720

=148 x 60

= $8,880

Total Cost

$ 227,860

$126,050

$101,810

Product

No. of units

Total Activity Cost

Per unit cost

Oven

1,490

$126,050

$84.597

Refrigerator

1,130

$101,810

$90.097

Total Cost

$227,860

Activity

Activity Pool Cost

Basis

Total Units as per basis

Activity rate per activity

Procurement

$ 162,560

Number of Purchase Orders

1,280

$ 127

Scheduling

$ 8,640

Number of Production Orders

320

$ 27

Material Handling

$ 27,060

Number of moves

820

$ 33

Product Development

$ 29,600

Number of engineering changes

200

$ 148

Total Cost

$ 227,860