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Problem - Activity cost pools, activity rates, and product costs using activity-based costing
Kitchen Mate, Inc., is estimating the activity cost associated with producing ovens and refrigerators. The indirect labor can be traced into four separate activity pools, based on time records provided by the employees. The budgeted activity cost and activity-base information are provided as follows:
Activity
Activity Pool Cost
Activity Base
Procurement
$121,000
Number of purchase orders
Scheduling
8,140
Number of production orders
Materials handling
21,000
Number of moves
Product development
22,440
Number of engineering changes
Total cost
$172,580
The estimated activity-base usage and unit information for Top Chef's two product lines was determined from corporate records as follows:
Number of Purchase Orders
Number of Production Orders
Number of Moves
Number of Engineering Changes
Units
Ovens
700
250
420
120
2,000
Refrigerators
400
280
50
1,541
Totals
1,100
370
170
3,541
Required -
a. Determine the activity rate for each activity cost pool.
b. Determine the activity-based cost per unit of each product.
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