Question

# Activity Rates and Activity-Based Product Costing Hammer Company produces a variety of electronic equipment. One of...

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 100,000 400,000 100,000

Required:

1. Calculate the overhead rates for each activity. (Round to two decimal places.)

 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 to the nearest dollar.)

 Deluxe \$per unit Regular \$

1.

 Setups 4000 per setup [2,000,000/(300+200)] Machining 200 per machine hour [80,000,000/(400000)] Engineering 40 per engineering hour [6,000,000/150000] Packing 0.2 per packing order [100000/500000]

2.

 Deluxe Regular Unit prime cost 529 483 ABC cost per unit 232.20 81.10 Per unit product cost 761.20 564.10

Workings:

 Deluxe Regular Setups 1200000 800000 Machining 20000000 60000000 Engineering 2000000 4000000 Packing 20000 80000 Total activity cost based 23220000 64880000 Quantity 100,000 800,000 ABC cost per unit 232.20 81.10