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 $28 per machine hour
Assembly $20 per direct labor hour
Setup $75 per setup
Inspecting $30 per inspection
Production scheduling $12 per production order
Purchasing $8 per purchase order
The activity-base usage quantities and units produced for each product were as follows:
Elliptical
Activity Base Machines Treadmills
Machine hours 700 600
Direct labor hours 182 64
Setups 20 15
Inspections 10 16
Production orders 30 20
Purchase orders 56 75
Units produced 400 250
Required:
Use the activity rate and usage information to calculate the total activity cost and activity cost per unit for each product.

Answer 1

Base Machines

Unit Cost = $25,848

Total Cost = $10,339,200

Treadmills

Unit Cost = $20,525

Total Cost = $5,131,250

Step-by-step explanation:

Base Machines

Unit Cost

Machine hours (700 × $28) $19,600

Direct labor hours (182 × $20) $3,640

Setups (20 × $75) $1,500

Inspections (10 × $30) $300

Production orders (30 × $12) $360

Purchase orders (56 × $8) $448

Total Unit Cost $25,848

Units produced 400

Total activity cost (400 × $25,848) $10,339,200

Treadmills

Unit Cost

Machine hours (600 × $28) $16,800

Direct labor hours (64 × $20) $1,280

Setups (15 × $75) $1,125

Inspections (16 × $30) $480

Production orders (20 × $12) $240

Purchase orders (75 × $8) $600

Total Unit Cost $20,525

Units produced 250

Total activity cost (250 × $20,525) $5,131,250