Hipster Home Appliances Inc. is estimating the activity cost associated with pro
ID: 2568762 • Letter: H
Question
Hipster Home Appliances 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
A measure of activity that is related to changes in cost. Used in analyzing and classifying cost behavior. Activity bases are also used in the denominator in calculating the predetermined factory overhead rate to assign overhead costs to cost objects.
information are provided as follows:
Question not attempted.
1
Activity
Activity Pool Cost
Activity Base
2
Procurement
$53,701.00
Number of purchase orders
3
Scheduling
4,020.00
Number of production orders
4
Materials handling
9,968.00
Number of moves
5
Product development
9,345.00
Number of engineering changes
6
Total cost
$77,034.00
The estimated activity-base usage and unit information for two product lines was determined from corporate records as follows:
purch. ords.
prod. ords.
moves
ECOs
/purch. ord.
/prod. ord.
/move
/ECO
purch. ords.
prod. ords.
moves
ECOs
/purch. ord.
/prod. ord.
/move
/ECO
purch. ords.
prod. ords.
moves
ECOs
/purch. ord.
/prod. ord.
/move
/ECO
purch. ords.
prod. ords.
moves
ECOs
/purch. ord.
/prod. ord.
/move
/ECO
Use the activity rates in (A) to determine the activity-based cost per unit of each product. Round the per-unit rates to the nearest cent.
purch. ords.
prod. ords.
moves
ECOs
/purch. ord.
/prod. ord.
/move
/ECO
purch. ords.
prod. ords.
moves
ECOs
/purch. ord.
/prod. ord.
/move
/ECO
purch. ords.
prod. ords.
moves
ECOs
/purch. ord.
/prod. ord.
/move
/ECO
purch. ords.
prod. ords.
moves
ECOs
/purch. ord.
/prod. ord.
/move
/ECO
1
Activity
Activity Pool Cost
Activity Base
2
Procurement
$53,701.00
Number of purchase orders
3
Scheduling
4,020.00
Number of production orders
4
Materials handling
9,968.00
Number of moves
5
Product development
9,345.00
Number of engineering changes
6
Total cost
$77,034.00
Explanation / Answer
Activity rate Activities Activity Cost Activity Base Total Activities ' Activity rate Procurement 53701 Number of purchase orders 647 83 Scheduling' 4020 Number of production orders 201 20 Material handling' 9968 Number of moves 356 28 Product Development 9345 Number of eng changes 105 89 Total 77034 Req A: REFRIGERATORS Activity Activity Usage * Activity rate = Activity Cost Procurement 239 83 19837 Scheduling' 56 20 1120 Material handling' 150 28 4200 Product Development 39 89 3471 Total 28628 Divide by Unit Volume 491 Activity cost per unit 58.31 ReqB: OVENS Activity Activity Usage * Activity rate = Activity Cost Procurement 408 83 33864 Scheduling' 145 20 2900 Material handling' 206 28 5768 Product Development 66 89 5874 Total 48406 Divide by Unit Volume 734 Activity cost per unit 65.95
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