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Calculate the activity rate for machine-related costs

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Question - Palmer Co. produces two types of volleyballs: Volleylite and Official Game.

Both products pass through two producing departments. The Official Game production is much more labour-intensive than the Volleylite. The Volleylite is also more popular. The following data have been gathered for the two products:

Product Data Official Game Volleylite

Units produced per year 20,000 200,000

Machine hours 10,000 40,000

Packing orders 30,000 30,000

Palmer Co. has decided to used activity-based costing and has developed two types of activities, machine related (based on machine hours), and other overhead (based on packing orders).

Machine-related costs equal $160,000. Other overhead costs equal $240,000.

Required -

1. Calculate the activity rate for machine-related costs based on machine hours.

2. Calculate the activity rate for other overhead costs based on packing orders.

3. Using the two activity rates, calculate the overhead cost per unit for Official Game.

4. Using the two activity rates, calculate the overhead cost per unit for Volleylite.

Reference no: EM132837506

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