Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a
Question:
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 Activity Cost Pool
Production…………………………………….$259,200
Setup…………………………………………….55,000
Material handling…………………………………9,750
Inspection……………………………………….60,000
Product engineering……………………………123,200
Total…………………………………………..$507,150
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:
Each product requires 40 minutes per unit of machine time.
Instructions
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.
3. Why aren't the activity unit costs equal across all three products since they require the same machine time per unit?
Step by Step Answer:
Financial And Managerial Accounting
ISBN: 9781337119207
14th Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac