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	$25	per machine hour
Assembly	$32	per direct labor hour
Setup	$87	per setup
Inspecting	$15	per inspection
Production scheduling	$14	per production order
Purchasing	$5	per purchase order

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

Activity Base	Elliptical Machines		Treadmill
Machine hours	600		400
Direct labor hours	193		223
Setups	30		30
Inspections	11		18
Production orders	50		45
Purchase orders	380		135
Units produced	540		380

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.

Answer 1