Question

Product Costs using Activity Rates

Hercules 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	$24	per machine hour
Assembly	$17	per direct labor hour
Setup	$51	per setup
Inspecting	$23	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	1,688		996
Direct labor hours	461		180
Setups	52		16
Inspections	666		400
Production orders	68		14
Purchase orders	172		105
Units produced	264		177

Use the activity rate and usage information to determine 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

	Total Activity Cost	Activity Cost Per Unit
Elliptical Machines	70123	265.62
Treadmill	38807	219.25
Workings:
Elliptical Machines :
Fabrication	40512	=24*1688
Assembly	7837	=17*461
Setup	2652	=51*52
Inspecting	15318	=23*666
Production scheduling	1224	=18*68
Purchasing	2580	=15*172
Total Activity Cost	70123
Divide by Units produced	264
Activity Cost Per Unit	265.62
Treadmill :
Fabrication	23904	=24*996
Assembly	3060	=17*180
Setup	816	=51*16
Inspecting	9200	=23*400
Production scheduling	252	=18*14
Purchasing	1575	=15*105
Total Activity Cost	38807
Divide by Units produced	177
Activity Cost Per Unit	219.25