Megan Industries manufactures several products
by | Mar 18, 2020 | Uncategorized
Megan Industries manufactures several products including a basic case for a popular smart phone. The company is considering adopting an activity-based costing approach for setting its budget. The company’s production activities, budgeted activity costs, and cost drivers for the coming year are as follows.
| Activity |
Activity overhead $ |
Cost driver |
Cost driver quantity |
| Machine setup |
$217,600 |
# of setups |
850 |
| Inspection |
149,930 |
# of quality tests |
470 |
| Materials receiving |
177,620 |
# of purchase orders |
1,660 |
The budgeted data for smart phone case production are as follows.
| Direct materials |
$2.80 |
per unit |
| Direct labor |
$0.64 |
per unit |
| Number of setups |
85 |
| Number of quality tests |
394 |
| Number of purchase orders |
61 |
| Production |
18,720 |
units |
|
|
|
|
|
| (a)
Calculate the activity rate for each cost pool.
| Machine setup |
$ 256 per setup |
| Inspection |
$ 319 per test |
| Materials receiving |
$ 107 per PO |
|
|
|
|
|
(b) Calculate the activity-based unit cost of the smart phone case. (Round answer to 2 decimal places, e.g. 1.64.)
| Activity-based unit cost |
$
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