Kitchen Wares, Inc., is estimating the activity cost associated with producing o
ID: 2449219 • Letter: K
Question
Kitchen Wares, 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:
The estimated activity-base usage and unit information for Top Chef's two product lines was determined from corporate records as follows:
a. Determine the activity rate for each activity cost pool. If required, round your answers to the nearest dollar.
b. Determine the activity-based cost per unit of each product. Round your answers to the nearest cent.
Activity Activity Pool Cost Activity Base Procurement $162,560 Number of purchase orders Scheduling 8,640 Number of production orders Materials handling 27,060 Number of moves Product development 29,600 Number of engineering changes Total cost $227,860Explanation / Answer
a.
Activity
Activity Pool Cost
Basis
Total Units as per basis
Activity rate per activity
Procurement
$ 162,560
Number of Purchase Orders
1,280
$ 127
Scheduling
$ 8,640
Number of Production Orders
320
$ 27
Material Handling
$ 27,060
Number of moves
820
$ 33
Product Development
$ 29,600
Number of engineering changes
200
$ 148
Total Cost
$ 227,860
b.
Activity
Activity Pool Cost
Basis
Total Units as per basis
Activity rate per activity
Ovens
Refrigerators
Procurement
$ 162,560
Number of Purchase Orders
1,280
$ 127
=127 x 660
= $83,820
=127 x 620
= $78,840
Scheduling
$ 8,640
Number of Production Orders
320
$ 27
=27 x 210
= $5,670
=27 x 110
= $2,970
Material Handling
$ 27,060
Number of moves
820
$ 33
=33 x 480
= $15,840
=33 x 340
= $11,220
Product Development
$ 29,600
Number of engineering changes
200
$ 148
=148 x 140
= $20,720
=148 x 60
= $8,880
Total Cost
$ 227,860
$126,050
$101,810
Product
No. of units
Total Activity Cost
Per unit cost
Oven
1,490
$126,050
$84.597
Refrigerator
1,130
$101,810
$90.097
Total Cost
$227,860
Activity
Activity Pool Cost
Basis
Total Units as per basis
Activity rate per activity
Procurement
$ 162,560
Number of Purchase Orders
1,280
$ 127
Scheduling
$ 8,640
Number of Production Orders
320
$ 27
Material Handling
$ 27,060
Number of moves
820
$ 33
Product Development
$ 29,600
Number of engineering changes
200
$ 148
Total Cost
$ 227,860
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