Alias Enterprises Inc. manufactures elliptical exercise machines and treadmills. The products are...

Question:

Alias Enterprises Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows.

Activity Activity Rate
Fabrication $28 per machine hour
Assembly $17 per direct labor hour
Setup $47 per setup
Inspecting $29 per inspection
Production scheduling $18 per production order
Purchase $15 per purchase order

The activity-based usage quantities and units produced for each product were as follows:

Activity Base Elliptical Machines Treadmill
Machine hours 1,770 1,044
Direct labor hours 464 181
Setups 59 18
Inspections 679 407
Production orders 78 16
Purchase orders 177 108
Units produced 272 182

Use the activity rate and usage information to calculate the total activity cost and activity cost per unit for each product. If required, round the per unit answers to the nearest cent.

Total Activity Cost Activity Cost Per Unit
Elliptical Machines $ $
Treadmill $ $

Allocating Overhead:

Overhead consists of all the indirect cost for materials and labor as well as all the costs that have to do with the factory/plant. Overhead cannot be directly traced to products but rather has to be allocated. Two common systems used to allocate overheard are a traditional costing system and an activity-based costing (ABC) system.

Answer and Explanation: 1

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Total Activity Cost Activity Cost Per Unit
Elliptical Machines $83,971 $308.72
Treadmill $4...

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Activity-Based Costing: Definition, Formula & Examples

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Chapter 13 / Lesson 6
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Understand activity-based costing and its purpose in business. Discover the activity-based costing formula and learn how to calculate it using examples.


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