Question

Atlas 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	$31	per machine hour
Assembly	$17	per direct labor hour
Setup	$46	per setup
Inspecting	$32	per inspection
Production scheduling	$18	per production order
Purchasing	$15	per purchase order

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

Activity Base	Elliptical Machines		Treadmill
Machine hours	1,742		1,028
Direct labor hours	485		189
Setups	43		13
Inspections	738		443
Production orders	75		15
Purchase orders	179		109
Units produced	310		208

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	$	$

Answer 1

Solution:

Computation of activity cost and activity cost per unit
Activity	Activity Base	Activity Rate	Elliptical Machines		Treadmill
			Usage	Allocated Costs	Usage	Allocated Costs
Fabrication	Machine hours	$31.00	1742	$54,002.00	1028	$31,868.00
Assembly	Direct labor hours	$17.00	485	$8,245.00	189	$3,213.00
Setup	Nos setups	$46.00	43	$1,978.00	13	$598.00
Inspecting	Nos of inspection	$32.00	738	$23,616.00	443	$14,176.00
Production Scheduling	Nos production orders	$18.00	75	$1,350.00	15	$270.00
Purchasing	Nos of purchase orders	$15.00	179	$2,685.00	109	$1,635.00
Total				$91,876.00		$51,760.00
Nos of units produced				310		208
Activity cost per unit				$296.37		$248.85