Question

Teldar Paper Company manufactures three products (computer paper, newsprint, and specialty paper) 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 Activity Cost Pool
Production .......... $ 640,000
Setup ............ 211,200
Moving ........... 35,100
Shipping ......... 131,625
Product engineering ...... 161,500
Total ........... $1,179,425
The activity bases identified for each activity are as follows:
Activity Activity Base _______
Production ........Machine hours
Setup ..........Number of setups
Moving .........Number of moves
Shipping ..........Number of customer orders
Product engineering ....Number of test runs
The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:


Each product requires 0.8 machine hour per unit.

Instructions
1. Determine the activity rate for each activity.
2. Determine the total and per-unit activity cost for all three products.
3. Why aren’t the activity unit costs equal across all three products since they require the same machine time perunit?


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  • CreatedJune 27, 2014
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