Question

Activity Rates and Activity-Based Product Costing Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant: Deluxe Regular Quantity 100,000 800,000 Selling price $900 $750 Unit prime cost $529 $483 In addition, the following information was provided so that overhead costs could be assigned to each product: Activity Name Activity Driver Deluxe Regular Activity Cost Setups Number of setups 300 200 $2,050,000 Machining Machine hours 100,000 300,000 48,000,000 Engineering Engineering hours 50,000 100,000 9,000,000 Packing Packing orders 100,000 400,000 150,000 Required: 1. Calculate the overhead rates for each activity. If required, carry your answers out to the nearest cent. Setups $ per setup Machining $ per machine hour Engineering $ per engineering hour Packing $ per packing order 2. Calculate the per-unit product cost for each product. Round your answers to the nearest whole dollar. Deluxe $ per unit Regular $ per unit

Answer 1

Answer:

1. Overheads rate per activity

Setup = $4,100 per setup

Machining = $120 per machine hour

Engineering = $60 per engineering hour

Packing = $0.30 per packing order

2. Cost per unit

Deluxe = $162.60

Normal = $53.675

Explanation:

As for the provided information:

We have,

Different activities as follows:

Setups = $2,050,000

Total setups = 300 + 200 = 500

Rate = $2,050,000/500 = $4,100 per setup

Machining = $48,000,000

Total machine hours = 100,000 + 300,000 = 400,000

Machine hour rate = $48,000,000/400,000 = $120 per machine hour

Engineering = $9,000,000

Total engineering hours = 50,000 + 100,000 = 150,000

Rate per hour = $9,000,000/150,000 = $60 per hour

Packing = $150,000

Packing orders = 100,000 + 400,000 = 500,000

Rate per hour = $150,000/500,000 = $0.30 per order

2. Calculating per product cost

Particulars              Deluxe                 Normal

Setup Cost

In 3:2 ratio            $1,230,000              $820,000

Machining Cost

In 1:3 ratio             $12,000,000          $36,000,000

Engineering cost

In 1:2 ratio            $3,000,000               $6,000,000

Packing Cost

In 1:4 Ratio             $30,000                  $120,000

Therefore total cost for each printer

                              $16,260,000           $42,940,000

Number of units         100,000              800,000

Cost per unit               $162.60             $53.675