Atmel, Inc., manufactures and sells two products. Data with regard to these prod

Question

Atmel, Inc., manufactures and sells two products. Data with regard to these products is given below. Product A Product B Units produced and sold 30,000 12,000 Machine hours required per unit 2 3 Receiving orders per product line 50 150 Production orders per product line 12 18 Production runs 8 12 Inspections 20 30 Total budgeted machine hours are 100,000. The budgeted overhead costs are shown below. Receiving costs $450,000 Engineering costs 300,000 Machine setup costs 25,000 Inspection costs 200,000 Total budgeted overhead costs $975,000 Using activity-based costing, the per-unit overhead cost allocation of receiving costs for product A is:

Explanation / Answer

Activity cost rate Receiving Activity = Total cost of activity / receiving orders' (450000 /(50+150)= $2250 per receiving order Enginnerring cost = Total cost activity / Production orders (300,000 /(12+18) = $10,000 per production order Machine setup cost=total cost of activity/Setups (25000/ (8+12))= $ 1250 per setup Inspection cost = total cost of inspection / Number of inspection (200,000 /(20+30)) = $ 4000 per inspection Total cost of Product A: Receiving activity (50 orders@2250) 112500 Engineering(12 orders@10000) 120000 Machine stup (8 runs@ 1250 per setup) 10000 Inspection (20 inspection@4000) 80000 Total overhead cost 322500 Number of units of Product A 30000 Overhead cost per unit 10.75

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