Question

Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) 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:

1	Activity	Activity Cost Pool
2	Production	$278,280.00
3	Setup	82,677.00
4	Material handling	11,110.00
5	Inspection	54,918.00
6	Product engineering	144,361.00
7	Total	$571,346.00

The activity bases identified for each activity are as follows:

Activity	Activity Base
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 the three products were determined from corporate records and are as follows:

Machine

Number of

Number of

Number of

Number of

Hours

Setups

Parts

Inspection Hours

Engineering Hours

Units

Alpha

1,057

64

84

475

113

1,374

Beta

861

109

164

317

172

935

Omega

401

208

257

225

218

488

Total

2,319

381

505

1,017

503

2,797

Each product requires 40 minutes per unit of machine time.

Answer 1