Roberts Company produces two weed eaters: basic and advanced. The company has four activi- ties: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below. Basic Advanced Total Units produced 100,000 300,000 $30,000,000 500,000 3,600 1,200 $38,000,000 600,000 Prime costs S8,000,000 100,000 Machine hours Engineering hours Receiving orders Inspection hours 400 4,000 1,600 400 800 1,600 2,400 Overhead costs: Machining Engineering Receiving Inspecting products $6,000,000 2,000,000 560,000 360,000 Required: 1. Calculate the four activity rates. 2. Calculate the unit costs using activity rates. Also, calculate the overhead cost per unit. 3. What if consumption ratios instead of activity rates were used to assign costs instead of activity rates? Show the cost assignment for the inspection activity.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Roberts Company produces two weed eaters: basic and advanced. The company has four activi-
ties: machining, engineering, receiving, and inspection. Information on these activities and their
drivers is given below.
Basic
Advanced
Total
Units produced
100,000
300,000
$30,000,000
500,000
3,600
1,200
$38,000,000
600,000
Prime costs
S8,000,000
100,000
Machine hours
Engineering hours
Receiving orders
Inspection hours
400
4,000
1,600
400
800
1,600
2,400
Overhead costs:
Machining
Engineering
Receiving
Inspecting products
$6,000,000
2,000,000
560,000
360,000
Required:
1. Calculate the four activity rates.
2. Calculate the unit costs using activity rates. Also, calculate the overhead cost per unit.
3. What if consumption ratios instead of activity rates were used to assign costs instead of
activity rates? Show the cost assignment for the inspection activity.
Transcribed Image Text:Roberts Company produces two weed eaters: basic and advanced. The company has four activi- ties: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below. Basic Advanced Total Units produced 100,000 300,000 $30,000,000 500,000 3,600 1,200 $38,000,000 600,000 Prime costs S8,000,000 100,000 Machine hours Engineering hours Receiving orders Inspection hours 400 4,000 1,600 400 800 1,600 2,400 Overhead costs: Machining Engineering Receiving Inspecting products $6,000,000 2,000,000 560,000 360,000 Required: 1. Calculate the four activity rates. 2. Calculate the unit costs using activity rates. Also, calculate the overhead cost per unit. 3. What if consumption ratios instead of activity rates were used to assign costs instead of activity rates? Show the cost assignment for the inspection activity.
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