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 Total Units produced 110,000 330,000 — Prime costs $9,020,000 $38,280,000 $47,300,000 Machine hours 110,000 550,000 660,000 Engineering hours 400 3,600 4,000 Receiving orders 300 900 1,200 Inspection hours 1,000 2,000 3,000 Overhead costs: Machining $9,900,000 Engineering 2,240,000 Receiving 240,000 Inspecting products 390,000 Required: 1. Calculate the four activity rates. Machining rate 15 Engineering rate 560 Receiving rate 200 Inspecting rate 130 2. Calculate the unit costs using activity rates. Round your answers to the nearest cent. Unit cost Basic Advanced Calculate the overhead cost per unit. Round your answers to the nearest cent. Overhead Cost Basic Advanced 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. Cost assignment Basic Advanced

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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	Total
Units produced	110,000	330,000	—
Prime costs	$9,020,000	$38,280,000	$47,300,000
Machine hours	110,000	550,000	660,000
Engineering hours	400	3,600	4,000
Receiving orders	300	900	1,200
Inspection hours	1,000	2,000	3,000

Overhead costs:
Machining	$9,900,000
Engineering	2,240,000
Receiving	240,000
Inspecting products	390,000

Required:

1. Calculate the four activity rates.

Machining rate	15
Engineering rate	560
Receiving rate	200
Inspecting rate	130

2. Calculate the unit costs using activity rates. Round your answers to the nearest cent.

	Unit cost
Basic
Advanced

Calculate the overhead cost per unit. Round your answers to the nearest cent.

	Overhead Cost
Basic
Advanced

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.

	Cost assignment
Basic
Advanced

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