Reference no: EM132690723

Problem - Activity Rates and Activity-based Costing

The total factory overhead for Engelhardt Company is budgeted for the year at $400,000, divided into four activities: machining, packing, setup, and quality control. The estimated cost and activity base associated with each activity is as follows:

Activity	Activity Cost	Activity Base
Machining	$195,000	Machine hours
Packing	48,000	Packing hours
Setup	94,000	Number of setups
Quality control	63,000	Inspection hours
Total	$400,000

Engelhardt manufactures two machined products: levers and housings. The activity-base usage quantities for each product by each activity is as follows:

	Machine Hours	Packing Hours	Number of Setups	Inspection Hours
Levers	300	80	12	40
Housings	700	120	68	110
Total	1,000	200	80	150

There are 2,000 units of each product produced for the year.

Required -

a. Determine the activity rates for each activity.

b. Determine the activity-based cost for each product using the rates in (b).