Megan Industries manufactures several products including a basic case for a popu

Question

Megan Industries manufactures several products including a basic case for a popular smart phone. The company is considering adopting an activity-based costing approach for setting its budget. The company's production activities, budgeted activity costs, and cost drivers for the coming year are as follows. Activity Activity overhead $ Cost driver Cost driver quantity Machine setup $210,800 # of setups 850 Inspection 182,280 * of quality tests 490 Materials receiving 216,960 # of purchase orders 1,920 The budgeted data for smart phone case production are as follows. Direct materials $2.80 per unit Direct labor 96 Number of setups 425 Number of quality tests 59 Production 21,530 units Calculate the activity rate for each cost pool. Machine setup dollar____________per setup Inspection dollar____________per test Materials receiving dollar_____________per PO

Explanation / Answer

Activity rate: Machine setup $ 248 per setup Inspection $ 372 per test Material Receiving $ 113 per PO Working: Activity Activity overheads (a) Cost drivers Cost driver quantity (b) Activity rate (a)/(b) Machine setup 210800 # of setups 850 248 Inspection 182280 # of quality tests 490 372 Material Receiving 216960 # of purchase orders 1920 113

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