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Megan Industries manufactures several products including a basic case for a popular smart phone. The ...

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Megan Industries manufactures several products including a basic case for a popular smart phone. The ...

Megan Industries manufactures several products including a basic case for a popular smart phone. The company is considering adopting an activity-based costing approach to set its budget. The company's production activities, budgeted activity costs, and cost drivers for the coming year are as follows.

Activity

Activity Overhead Cost

Cost Driver

Cost Driver Quantity

Machine setup	$192,000	# of setups	800
Inspection	175,000	# of quality tests	500
Materials receiving	198,000	# of purchase orders	1,800

The budgeted data for smart phone case production are as follows.

Direct materials	$2.60 per unit
Direct labor	$0.59 per unit
Number of setups	90
Number of quality tests	400
Number of purchase orders	60
Production	20,000 units

Required:

a.	Calculate the activity rate for each cost pool.

b.	Calculate the activity-based unit cost of the smart phone case.

Textbook

Managerial Accounting

Edition: 4^th

Author: Davis

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