Activity-Based Department Rate Product Costing and Product Cost Distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: Indirect labor $400,400 Subassembly Department 198,800 Final Assembly Department 114,800 Total $714,000 The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Activity Budgeted Activity Cost Activity Base Setup $138,600 Number of setups Quality control 261,800 Number of inspections Total $400,400 The activity-base usage quantities and units produced for the two products follow: Number of Setups Number of Inspections Direct Labor Hours—Subassembly Direct Labor Hours—Final Assembly Units Produced Receivers 80 450 875 525 7,000 Loudspeakers 320 1,750 525 875 7,000 Total 400 2,200 1,400 1,400 14,000 4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent. Product Total Activity Cost Activity Cost Per Unit Receivers $fill in the blank 11 $fill in the blank 12 Loudspeakers: $fill in the blank 13 $fill in the blank 14

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 3PA: Activity-based and department rate product costing and product cost distortions Black and Blue...

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Activity-Based Department Rate Product Costing and Product Cost Distortions

Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows:

Indirect labor	$400,400
Subassembly Department	198,800
Final Assembly Department	114,800
Total	$714,000

The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows:

Activity	Budgeted Activity Cost		Activity Base
Setup		$138,600		Number of setups
Quality control		261,800		Number of inspections
Total		$400,400

The activity-base usage quantities and units produced for the two products follow:

	Number of Setups		Number of Inspections	Direct Labor Hours—Subassembly		Direct Labor Hours—Final Assembly	Units Produced
Receivers		80			450			875	525	7,000
Loudspeakers		320			1,750			525	875	7,000
Total		400			2,200			1,400	1,400	14,000

4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent.

Product	Total Activity Cost	Activity Cost Per Unit
Receivers	$fill in the blank 11	$fill in the blank 12
Loudspeakers:	$fill in the blank 13	$fill in the blank 14

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