Exercise 17-19 (Algo) Activity-based costing to compute activity rates, overhead cost per unit, and product cost per unit LO P3

Northwest Company produces two types of glass shelving: rounded edge and squared edge. The company reports the following cost data.

	Rounded Edge	Squared Edge	Total
Direct materials	$ 42,000	$ 54,000	$ 96,000
Direct labor	14,000	36,000	50,000
Overhead (using plantwide rate)	48,600	91,400	140,000
Total product cost	$ 104,600	$ 181,400	$ 286,000
Units produced	14,000	18,000
Product cost per unit	$ 7.47	$ 10.08

Northwests controller wants to apply activity-based costing to allocate the $140,000 of overhead cost to the two products to see whether product cost per unit would change markedly from that above. The companys budgeted activity usage equals its actual activity usage for the period. The following additional information is collected.

Activity	Budgeted Cost	Activity Cost Driver	Activity Usage
			Rounded Edge		Squared Edge		Total
Purchasing	$ 7,400	Purchase orders	209	orders	531	orders	740	orders
Depreciation of machinery	72,600	Machine hours	500	hours	1,500	hours	2,000	hours
Setup	60,000	Setups	40	setups	210	setups	250	setups
Total	$ 140,000

Required: 1. Compute the activity rate for each activity using activity-based costing. 2. Compute overhead cost per unit for each of the two products using activity-based costing. 3. Determine product cost per unit for each of the two products using activity-based costing.