Caldwell Home Appliances Inc. is estimating the activity cost associated with pr

Question

Caldwell Home Appliances 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 Pool Cost $12,600 90,000 Activity Base Number of purchase orders Number of production orders Number of moves Number of engineering changes Materials handling Product development Total cost 11,000 50,000 163,600 The estimated activity-base usage and unit information for two product lines was determined from corporate records as follows: Number of Number of Number of Number of Engineering Purchase Orders Units 1,000 500 1,500 Ovens 80 120 200 400 300 400 200 Totals 1,200 a. Determine the activity rate for each activity cost pool. Procurement (per purchase order) Scheduling (per production order) Materials handling (per move Product development (per engineering change) b. Determine the activity-based cost per unit of each product. er unit per unit

Explanation / Answer

a Procurement 18 =12600/700 Scheduling 75 =90000/1200 Materials handling 22 =11000/500 Product development 250 =50000/200 b Ovens Refrigerators Procurement 7200 5400 Scheduling 60000 30000 Materials handling 6600 4400 Product development 20000 30000 Total 93800 69800 Units 1000 500 Cost per unit 93.8 139.6

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