Teldar Manufacturing Company is a diversified manufacturer thatmanufactures three products (M5, Z4, and I8) in a continuousproduction process. Senior management has asked the controller toconduct an activity-based costing study. The controller identifiedthe amount of factory overhead required by the critical activitiesof the organization as follows:
1
Activity
Activity Cost Pool
2
Production
$251,598.00
3
Setup
92,035.00
4
Material handling
10,736.00
5
Inspection
49,833.00
6
Product engineering
136,230.00
7
Total
$540,432.00
The activity bases identified for each activity are asfollows:
Activity ActivityBase Production Machine hours Setup Number of setups Material handling Number of parts Inspection Number of inspection hours Product engineering Number of engineering hours
The activity-base usage quantities and units produced for thethree products were determined from corporate records and are asfollows:
Machine Number of Number of Number of Number of Hours Setups Parts Inspection Hours Engineering Hours Units M5 970 63 84 489 123 1,354 Z4 802 123 138 272 170 1,044 I8 435 209 266 256 185 452 Total 2,207 395 488 1,017 478 2,850
Each product requires 0.72 machine hour per unit.
Required: Complete the Activity Tablesfor M5, Z4 and I8. 1. Determine the activity ratefor each activity.* 2. Use the activity rates in(1) to determine the total and per-unit activity costs associatedwith all three products.* * If required, round all per-unit amounts to the nearestcent.
Required: Complete the Activity Table forM5. 1. Determine the activity ratefor each activity.* 2. Use the activity rates in(1) to determine the total and per-unit activity costs associatedwith all three products.* * If required, round allper-unit amounts to the nearest cent.
M5 Activity Activity- Base Activity Activity Usage X Rate = Cost Production Setup Material handling Inspection Engineering Total activity cost ÷ Number of units ÷ Activity cost per unit
Required: Complete the Activity Table forZ4. 1. Determine the activity ratefor each activity.* 2. Use the activity rates in(1) to determine the total and per-unit activity costs associatedwith all three products.* * If required, round allper-unit amounts to the nearest cent.
Z4 Activity Activity- Base Activity Activity Usage X Rate = Cost Production Setup Material handling Inspection Engineering Total activity cost ÷ Number of units ÷ Activity cost per unit
Required: Complete the Activity Table forI8. 1. Determine the activity ratefor each activity.* 2. Use the activity rates in(1) to determine the total and per-unit activity costs associatedwith all three products.* * If required, round allper-unit amounts to the nearest cent.
I8 Activity Activity- Base Activity Activity Usage X Rate = Cost Production Setup Material handling Inspection Engineering Total activity cost ÷ Number of units ÷ Activity cost per unit
Teldar Manufacturing Company is a diversified manufacturer thatmanufactures three products (M5, Z4, and I8) in a continuousproduction process. Senior management has asked the controller toconduct an activity-based costing study. The controller identifiedthe amount of factory overhead required by the critical activitiesof the organization as follows:
1 | Activity | Activity Cost Pool |
2 | Production | $251,598.00 |
3 | Setup | 92,035.00 |
4 | Material handling | 10,736.00 |
5 | Inspection | 49,833.00 |
6 | Product engineering | 136,230.00 |
7 | Total | $540,432.00 |
The activity bases identified for each activity are asfollows:
| Activity | ActivityBase |
|---|---|
| Production | Machine hours |
| Setup | Number of setups |
| Material handling | Number of parts |
| Inspection | Number of inspection hours |
| Product engineering | Number of engineering hours |
The activity-base usage quantities and units produced for thethree products were determined from corporate records and are asfollows:
| Machine | Number of | Number of | Number of | Number of | ||
| Hours | Setups | Parts | Inspection Hours | Engineering Hours | Units | |
| M5 | 970 | 63 | 84 | 489 | 123 | 1,354 |
| Z4 | 802 | 123 | 138 | 272 | 170 | 1,044 |
| I8 | 435 | 209 | 266 | 256 | 185 | 452 |
| Total | 2,207 | 395 | 488 | 1,017 | 478 | 2,850 |
Each product requires 0.72 machine hour per unit.
| Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Complete the Activity Tablesfor M5, Z4 and I8.
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| Required: | |||||||
Complete the Activity Table forZ4.
|
| Z4 | |||||
| Activity | Activity- | ||||
| Base | Activity | Activity | |||
| Usage | X | Rate | = | Cost | |
| Production | |||||
| Setup | |||||
| Material handling | |||||
| Inspection | |||||
| Engineering | |||||
| Total activity cost | |||||
| ÷ Number of units | ÷ | ||||
| Activity cost per unit | |||||
| Required: | |||||||
Complete the Activity Table forI8.
|
| I8 | |||||
| Activity | Activity- | ||||
| Base | Activity | Activity | |||
| Usage | X | Rate | = | Cost | |
| Production | |||||
| Setup | |||||
| Material handling | |||||
| Inspection | |||||
| Engineering | |||||
| Total activity cost | |||||
| ÷ Number of units | ÷ | ||||
| Activity cost per unit | |||||
Related questions
Teldar Manufacturing Company is a diversified manufacturer thatmanufactures three products (M5, Z4, and I8) in a continuousproduction process. Senior management has asked the controller toconduct an activity-based costing study. The controller identifiedthe amount of factory overhead required by the critical activitiesof the organization as follows:
1 | Activity | Activity Cost Pool |
2 | Production | $264,000.00 |
3 | Setup | 96,000.00 |
4 | Material handling | 9,600.00 |
5 | Inspection | 50,000.00 |
6 | Product engineering | 150,000.00 |
7 | Total | $569,600.00 |
The activity bases identified for each activity are asfollows:
Activity | Activity Base |
|---|---|
| Production | Machine hours |
| Setup | Number of setups |
| Material handling | Number of parts |
| Inspection | Number of inspectionhours |
| Product engineering | Number of engineeringhours |
The activity-base usage quantities and units produced for thethree products were determined from corporate records and are asfollows:
| Machine | Number of | Number of | Number of | Number of | ||
| Hours | Setups | Parts | Inspection Hours | Engineering Hours | Units | |
| M5 | 1,000 | 60 | 80 | 450 | 125 | 1,250 |
| Z4 | 800 | 120 | 150 | 300 | 175 | 1,000 |
| I8 | 400 | 220 | 250 | 250 | 200 | 500 |
| Total | 2,200 | 400 | 480 | 1,000 | 500 | 2,750 |
Each product requires 0.8 machine hour per unit.
| Required: | |||||||
Complete the Activity Tablesfor M5, Z4 and I8.
|
| Required: | ||||||||||||||||||||||||||||||
Complete the Activity Tablefor M5.
| ||||||||||||||||||||||||||||||
Activity-Based Product Costing
Alabama Manufacturing Company is a diversified manufacturer that manufactures three products (M5, Z4, and I8) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:
| Activity | Activity Cost Pool | |||
| Production | $356,400 | |||
| Setup | 132,300 | |||
| Material handling | 65,700 | |||
| Inspection | 151,700 | |||
| Product Engineering | 66,000 | |||
| Total | $772,100 | |||
The activity bases identified for each activity are as follows:
| Activity | Activity Base |
| Production | Machine hours |
| Setup | Number of setups |
| Material handling | Number of moves |
| Inspection | Number of customer orders |
| Product Engineering | Number of test runs |
The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:
| Machine Hours | Number of Setups | Number of Moves | Number of Customer Orders | Number of Test Runs | Units | ||
| M5 | 2,900 | 80 | 180 | 820 | 50 | 7,250 | |
| Z4 | 1,850 | 110 | 270 | 2,260 | 320 | 4,625 | |
| I8 | 1,850 | 110 | 450 | 1,020 | 130 | 4,625 | |
| Total | 6,600 | 300 | 900 | 4,100 | 500 | 16,500 | |
Each product requires 0.9 machine hour per unit.
Required:
If required, round all per unit amounts to the nearest cent.
1. Determine the activity rate for each activity.
| Production | $ per machine hour |
| Setup | $ per setup |
| Material handling | $ per move |
| Inspection | $ per cust. ord. |
| Product Engineering | $ per test run |
2. Determine the total and per-unit activity cost for all three products.
| Total Activity Cost | Activity Cost Per Unit | |
| M5 | $ | $ |
| Z4 | $ | $ |
| I8 | $ | $ |
3. Why arenât the activity unit costs equal across all three products since they require the same machine time per unit?
The unit costs are different because the products consume many activities in ratios different from the .
Activity-Based Costing
Hercules Industries manufactures two types of electrical powerunits, custom and standard, which involve four overheadactivitiesâproduction setup, procurement, quality control, andmaterials management. An activity analysis of the overhead revealedthe following estimated costs and activity bases for theseactivities:
| Activity | Cost | Activity Base | |
| Production setup | $ 87,000 | Number of setups | |
| Procurement | 159,500 | Number of purchase orders (PO) | |
| Quality control | 174,000 | Number of inspections | |
| Materials management | 140,000 | Number of components | |
| Total | $560,500 | ||
The activity-base usage quantities for each product are asfollows:
| Setups | Purchase Orders | Inspections | Components | UnitVolume | ||||||
| Custom | 300 | 1,200 | 2,400 | 400 | 2,000 | |||||
| Standard | 300 | 250 | 500 | 300 | 2,000 | |||||
| Total | 600 | 1,450 | 2,900 | 700 | 4,000 | |||||
a. Determine an activity rate for eachactivity.
| Activity Rates | Production Setup | Procurement | Quality Control | Materials Management | ||||
| Activity cost | $ | $ | $ | $ | ||||
| Activity base | ||||||||
| Activity rate | $ | /setup | $ | /PO | $ | /inspection | $ | /component |
b. Assign activity costs to each product, anddetermine the unit activity cost using the activity rates from part(a). Round unit costs to the nearest cent.
| Custom | Standard | |||
| Setups Total | $ | $ | ||
| Purchase Orders Total | ||||
| Inspections Total | ||||
| Components Total | ||||
| Total product cost | $ | $ | ||
| Unit volume | ||||
| Unit cost | $ | $ | ||
c. Assume that each product required one directlabor hour per unit. Determine the per unit cost if factoryoverhead is allocated on the basis of direct labor hours. Roundyour answer to the nearest cent.
$per unit
d. The custom product will consumemore materials management activities than will thestandard product.
