Reference no: EM13515425

Product costing in an activity-based costing system

Fortunado, Inc., uses activity-based costing to account for its chrome bumper manufacturing process. Company managers have identified four manufacturing activities: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for 2012 and their allocation bases are as follows:

Activity	Total Budgeted Cost	Allocation Base
Materials handling	$ 9,000	Number of parts
Machine setup	3,900	Number of setups
Insertion of parts	42,000	Number of parts
Finishing	82,000	Finishing direct labor hours
Total	$ 136,900

Fortunado expects to produce 500 chrome bumpers during the year. The bumpers are expected to use 4,000 parts, require 10 setups, and consume 1,000 hours of finishing time.

Requirements

1. Compute the cost allocation rate for each activity.

2. Compute the indirect manufacturing cost of each bumper.