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Problem - Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:
Activity
Activity Rate
Fabrication
$30 per machine hour
Assembly
$35 per direct labor hour
Setup
$90 per setup
Inspecting
$20 per inspection
Production scheduling
$19 per production order
Purchasing
$5 per purchase order
The activity-base usage quantities and units produced for each product were as follows:
Activity Base
Elliptical Machines
Treadmills
Machine hours
600
400
Direct labor hours
190
223
Setups
30
Inspections
15
25
Production orders
40
Purchase orders
318
85
Units produced
500
320
Required - Use the activity rate and usage information to determine the total activity cost and activity cost per unit for each product.
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