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Question - Activity-Based Product Costing - Davis Company produces two hair dryers: regular and deluxe. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below.
Regular
Deluxe
Total
Units produced
120,000
360,000
-
Prime costs
$9,600,000
$41,760,000
$51,360,000
Machine hours
600,000
720,000
Engineering hours
200
1,800
2,000
Receiving orders
400
1,200
1,600
Inspection hours
800
2,400
Overhead costs:
Machining
$10,800,000
Engineering
1,040,000
Receiving
624,000
Inspecting products
384,000
Required -
1. Calculate the four activity rates.
2. Calculate the unit costs using activity rates.
Calculate the overhead cost per unit.
3. If consumption ratios instead of activity rates were used to assign costs instead of activity rates, show the cost assignment for the inspection activity.
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