Question

Product Costs using Activity Rates

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	$30	per machine hour
Assembly	$9	per direct labor hour
Setup	$56	per setup
Inspecting	$26	per inspection
Production scheduling	$10	per production order
Purchasing	$7	per purchase order

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

Activity Base	Elliptical Machines		Treadmill
Machine hours	1,987		1,172
Direct labor hours	477		186
Setups	57		18
Inspections	684		410
Production orders	65		13
Purchase orders	212		129
Units produced	320		214

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

	Total Activity Cost	Activity Cost Per Unit
Elliptical Machines	87013	271.92
Treadmill	49535	231.47
Working:
Activity Base	Elliptical Machines	Treadmill
Fabrication	59610	35160
Assembly	4293	1674
Setup	3192	1008
Inspecting	17784	10660
Production scheduling	650	130
Purchasing	1484	903
Total Activity Cost	87013	49535
Divided by Units produced	320	214
Activity Cost Per Unit	271.92	231.47
Activity cost = Activity used*Activity Rate