Activity Cost Pools, Activity Rates, and Product Costs using Activity-Based Costing
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||Activity Pool Cost||Activity Base|
|Procurement||$12,600||Number of purchase orders|
|Scheduling||90,000||Number of production orders|
|Materials handling||11,000||Number of moves|
|Product development||50,000||Number of engineering changes|
The estimated activity-base usage and unit information for two product lines was determined as follows:
Engineering Change Orders
a. Determine the activity rate for each activity cost pool.
|Procurement (per purchase order)||$|
|Scheduling (per production order)||$|
|Materials handling (per move)||$|
|Product development (per engineering change order)||$|
b. Determine the activity-based cost per unit of each product.
|Ovens||$ per unit|
|Refrigerators||$ per unit|
a) Compute the activity rate for each activity cost pool:
Therefore, activity rate for procurement, scheduling, material handling , and product development are $18, $75, $22, and $250 respectively.
b) Compute the activity base cost per unit of e...
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