PR 18-4A Activity-Based Product Costing Obj. 4 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: Activity Production Setup Materials handling The activity bases identified for each activity are as follows: Inspection Product engineering Activity Production Setup Materials handling Inspection Product engineering Total Alpha Beta Omega Total 3. The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: Activity Base Machine hours Number of setups Number of parts Number of inspection hours Number of engineering hours Machine Hours 1,440 1,080 720 3,240 Number of Setups 75 165 310 550 Activity Cost Pool $259,200 55,000 9,750 60,000 Answer Check Figure: Alpha total activity cost, $179,650 123,200 $507,150 Number of Parts 65 80 180 325 require the same machine time per unit? Each product requires 40 minutes per unit of machine time. Instructions Number of Inspection Hours 400 300 500 1,200 Number of Engineering Hours 125 175 140 440 M 1. Determine the activity rate for each activity. 2. Determine the total and per-unit activity cost for all three products. Round to nearest cent. Units 1,800 1,350 900 4,050 Why aren't the activity unit costs equal across all three products since they +
PR 18-4A Activity-Based Product Costing Obj. 4 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: Activity Production Setup Materials handling The activity bases identified for each activity are as follows: Inspection Product engineering Activity Production Setup Materials handling Inspection Product engineering Total Alpha Beta Omega Total 3. The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: Activity Base Machine hours Number of setups Number of parts Number of inspection hours Number of engineering hours Machine Hours 1,440 1,080 720 3,240 Number of Setups 75 165 310 550 Activity Cost Pool $259,200 55,000 9,750 60,000 Answer Check Figure: Alpha total activity cost, $179,650 123,200 $507,150 Number of Parts 65 80 180 325 require the same machine time per unit? Each product requires 40 minutes per unit of machine time. Instructions Number of Inspection Hours 400 300 500 1,200 Number of Engineering Hours 125 175 140 440 M 1. Determine the activity rate for each activity. 2. Determine the total and per-unit activity cost for all three products. Round to nearest cent. Units 1,800 1,350 900 4,050 Why aren't the activity unit costs equal across all three products since they +
Chapter1: Financial Statements And Business Decisions
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:PR 18-4A Activity-Based Product Costing
Obj. 4 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:
Activity
Production
Setup
Materials handling
Inspection
Product engineering
The activity bases identified for each activity are as follows:
Activity
Production
Alpha
Beta
3.
Setup
Materials handling
Inspection
Product engineering
Total
Omega
Total
Activity Base
Machine hours
Number of setups
Number of parts
The activity-base usage quantities and units produced for the three products were
determined from corporate records and are as follows:
Number of inspection hours
Number of engineering hours
Machine
Hours
1,440
1,080
720
3,240
Number of
Setups
Activity Cost Pool
$259,200
55,000
9,750
60,000
75
165
310
550
123,200
$507,150
Number of
Parts
65
80
180
325
require the same machine time per unit?
Number of
Inspection
Hours
Each product requires 40 minutes per unit of machine time.
Instructions
400
300
500
1,200
Number of
Engineering
Hours
125
175
140
440
Units
1,800
1,350
900
4,050
1. Determine the activity rate for each activity.
2. Determine the total and per-unit activity cost for all three products. Round to nearest cent.
Answer
Check Figure: Alpha total activity cost, $179,650
Why aren't the activity unit costs equal across all three products since they
+
![1.
2.
3.
Total activity cost
Total activity base
Activity rate
Activity
Production
Setup
Material handling
Inspection
Engineering
Total
Number of units
Activity cost per unit
[Key essay answer here]
Production
mh
/mh
Activity Base Usage
X
mh
setups
parts
insp. hours
eng. hours
Alpha
Setup
Activity
Rate
·
setups
/setup
Activity
Cost
Materials Handling
no. parts
/part
Activity Base Usage
mh
setups
parts
insp. hours
eng. hours
Inspection
Betal
Activity
Rate
=
insp. hours
/hour
Activity
Cost
Engineering
eng. hours
/hour
Activity Base Usage
X
Omega
mh
setups
parts
insp. hours
eng. hours
Activity
Rate =
Activity
Cost](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2848ae22-53f7-472d-9cf5-b927a11da997%2F8f4137b6-6691-4bd2-8c30-3408f946328c%2Fb0s9ei_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1.
2.
3.
Total activity cost
Total activity base
Activity rate
Activity
Production
Setup
Material handling
Inspection
Engineering
Total
Number of units
Activity cost per unit
[Key essay answer here]
Production
mh
/mh
Activity Base Usage
X
mh
setups
parts
insp. hours
eng. hours
Alpha
Setup
Activity
Rate
·
setups
/setup
Activity
Cost
Materials Handling
no. parts
/part
Activity Base Usage
mh
setups
parts
insp. hours
eng. hours
Inspection
Betal
Activity
Rate
=
insp. hours
/hour
Activity
Cost
Engineering
eng. hours
/hour
Activity Base Usage
X
Omega
mh
setups
parts
insp. hours
eng. hours
Activity
Rate =
Activity
Cost
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