Activity-Based Product Costing Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows: Activity Activity Cost Pool Production   $259,200   Setup   55,000   Materials handling   9,750   Inspection   60,000   Product engineering   123,200     Total   $507,150     The activity bases identified for each activity are as follows: Activity Activity Base Production Machine hours Setup Number of setups Materials handling Number of parts Inspection Number of inspection hours Product engineering Number of engineering hours   The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:     Machine Hours   Number of Setups   Number of Parts   Number of Inspection Hours   Number of Engineering Hours   Units Alpha 1,440     75     65     400     125     1,800 Beta 1,080 165 80 300 175 1,350 Omega 720 310 180 500 140 900   Total 3,240 550 325 1,200 440 4,050   Each product requires 48 minutes per unit of machine time. Required: If required, round all per unit amounts to the nearest cent. 1.  Determine the activity rate for each activity. Production $fill in the blank 1 per machine hour Setup $fill in the blank 2 per setup Materials handling $fill in the blank 3 per part Inspection $fill in the blank 4 per inspection hour Product engineering $fill in the blank 5 per engineering hour 2.  Determine the total and per-unit activity cost for all three products.   Total Activity Cost Activity Cost Per Unit Alpha $fill in the blank 6 $fill in the blank 7 Beta fill in the blank 8 fill in the blank 9 Omega fill in the blank 10 fill in the blank 11 3.  Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit? The unit costs are different because the products consume many activities in ratios different from the

Activity-Based Product Costing

Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

The activity bases identified for each activity are as follows:

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

Each product requires 48 minutes per unit of machine time.

Required:

If required, round all per unit amounts to the nearest cent.

1.  Determine the activity rate for each activity.

2.  Determine the total and per-unit activity cost for all three products.

3.  Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit?

The unit costs are different because the products consume many activities in ratios different from the  .