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 - $2,000,000 Machining - Machine hours - 100,000 - 300,000 - 80,000,000 Engineering - Engineering hours - 50,000 - 100,000 - 6,000,000 Packing - Packing orders - 100,000 - 400,000 - 100,0001. 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.Calculate the overhead rates for each activity. If required, carry your answers out to the nearest cent.

Setups - $ _4000__per setup   = $2,000,000 / 500  

Machining - $ __20_ per machine hour  =$8,000,000 / 400,000

Engineering - $ _40__ per engineering hour  =  $6,000,000 / 150,000

Packing - $ _0.2__ per packing order = $ 100,000 / 500,000

2. Calculate the per-unit product cost for each product. Round your answers to the nearest whole dollar.

Deluxe - $ ___7396.67__ per unit

Regular - $ _10569.92__ per unit

Explanation:

Working:

Activity Name -           Activity Driver -         Deluxe    - Regular - Activity Cost Setups - Number of setups -       300 -             200 -         $2,000,000

Rate= Activity Cost  / Activity Driver

Rate = $2,000,000 / 300                                   6666.67

Rate = $2,000,000 / 200                                                         10,000

Machining -         Machine hours -        100,000 - 300,000       80,000,000

Rate= Activity Cost  / Activity Driver

Rate = $8,000,000 / 100,000=                             80

Rate = $8,000,000 / 300,000=                                                26.67

Engineering -     Engineering hours -    50,000 - 100,000 -        6,000,000

Rate= Activity Cost  / Activity Driver

Rate = $6,000,000 / 50,000=                             120

Rate = $6,000,000 / 100,000                                                         60

Packing -            Packing orders -      100,000 - 400,000 -         100,000

Rate= Activity Cost  / Activity Driver

Rate = $ 100,000 / 100,000=                                      1

Rate = $ 100,000 / 400,000=                                                           0.25

Total                                                                           6867.67         10086.92                                                      

                                  Deluxe -            Regular

Unit prime cost:               $529 -             $483

Overhead Applied        6867.67         10086.92                                                      

Total                                  7396.67         10569.92