Activity Cost Pools, Activity Rates, and Product Costs using Activity-Based Cost

Question

Activity Cost Pools, Activity Rates, and Product Costs using Activity-Based Costing 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: Activity Procurement Scheduling Materials handling Product development Total cost The estimated activity-base usage and unit information for Kitchen Wares' two product lines was determined from corporate records as follows: Activity Pool Cost Activity Base $126,500 9,000 33,110 30,000 $198,610 Number of purchase orders Number of production orders Number of moves Number of engineering changes Number of Number of Number of Number of Moves 450 320 770 Units 1,390 1,040 2,430 Purchase Orders Production Orders Engineering Changes 560 540 1,100 240 120 360 140 60 200 Ovens Refrigerators Totals a. Determine the activity rate for each activity cost pool. If required, round your answers to the nearest dollar Procurement (per purchase order) Scheduling (per production order) Materials handling (per move) Product development (per engineering change) b. Determine the activity-based cost per unit of each product. Round your answers to the nearest cent Ovens per unit Refrigerators$ per unit

Explanation / Answer

a) Determine activity rate :

Calculate cost per unit :

Activity Activity cost Activity base activity rate Procurement 126500 No of purchase order 1100 115 per order Scheduling 9000 No of production order 360 25 per order Material Handling 33110 No of moves 770 43 per moves Product Development 30000 No of engineering changes 200 150 per changes 198610

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