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nitnit nitnit
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4 months ago
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.

ActivityActivity Overhead CostCost DriverCost Driver Quantity
Machine setup$192,000# of setups   800
Inspection   175,000# of quality tests   500
Materials receiving   198,000# of purchase orders1,800
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 setups90
Number of quality tests400
Number of purchase orders60
Production20,000 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

Managerial Accounting


Edition: 4th
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nguyenphuc1990nguyenphuc1990
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4 months ago
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More solutions for this book are available here
a.Machine setup$192,000 ÷ 800 setups = $240/setup
Inspection$175,000 ÷ 500 tests = $350/test
Materials receiving$198,000 ÷ 1,800 POs = $110/PO

b.
Machine setups$  21,600($240 × 90 setups)
+Inspections140,000($350 × 400 inspections)
+Materials receiving      6,600($110 × 60 POs)
=Total overhead cost168,200
÷Units produced    20,000
=OH cost/unit$8.41
+Direct material2.60
+Direct labor        0.59
=Activity-based unit cost$    11.60
1

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nitnit Author
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4 months ago
Good timing, thanks!
loki1345
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Yesterday
Thank you, thank you, thank you!
gage
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2 hours ago
You make an excellent tutor!
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