Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows: 1 Activity Activity Cost Pool 2 Production $259,200.
Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows: 1 Activity Activity Cost Pool 2 Production $259,200.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:
1
|
Activity
|
Activity Cost Pool
|
2
|
Production
|
$259,200.00
|
3
|
Setup
|
55,000.00
|
4
|
Material handling
|
9,750.00
|
5
|
Inspection
|
60,000.00
|
6
|
Product engineering
|
123,200.00
|
7
|
Total
|
$507,150.00
|
The activity bases identified for each activity are as follows:
Activity
|
Activity Base
|
Production | Machine hours |
Setup | Number of setups |
Material handling | Number of parts |
Inspection | Number of inspection hours |
Product engineering | Number of engineering hours |
The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:
Machine | Number of | Number of | Number of | Number of | ||
Hours | Setups | Parts | Inspection Hours | Engineering Hours | Units | |
Alpha | 1,440 | 75 | 65 | 400 | 125 | 1,800 |
Beta | 1,080 | 165 | 80 | 300 | 175 | 1,350 |
Omega | 720 | 310 | 180 | 500 | 140 | 900 |
Total | 3,240 | 550 | 325 | 1,200 | 440 | 4,050 |
Each product requires 40 minutes per unit of machine time.
Required: | |||||||||
Complete the Activity Tables for Alpha, Beta and Omega.
|
Complete the Activity Table for Alpha.
|
Alpha | |||||
Activity | Activity- | ||||
Base | Activity | Activity | |||
Usage | X | Rate | = | Cost | |
Production |
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||
Setup |
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||
Material handling |
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Inspection |
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Product Engineering |
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Total activity cost |
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||||
Number of units |
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||||
Activity cost per unit |
Complete the Activity Table for Beta.
|
Beta | |||||
Activity | Activity- | ||||
Base | Activity | Activity | |||
Usage | X | Rate | = | Cost | |
Production |
|
|
|
||
Setup |
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|
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||
Material handling |
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||
Inspection |
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||
Product Engineering |
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Total activity cost |
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||||
Number of units |
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||||
Activity cost per unit |
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Complete the Activity Table for Omega.
|
Omega | |||||
Activity | Activity- | ||||
Base | Activity | Activity | |||
Usage | X | Rate | = | Cost | |
Production |
|
|
|
||
Setup |
|
|
|
||
Material handling |
|
|
|
||
Inspection |
|
|
|
||
Product Engineering |
|
|
|
||
Total activity cost |
|
||||
Number of units |
|
||||
Activity cost per unit |
|
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