Cardio Care Inc. manufactures stationary bicycles and treadmills. The products are produced in the Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows: Activity Activity Rate Fabrication $22 per machine hour (mh) Assembly $14 per direct labor hour (dlh) Setup $40 per setup Inspecting $20 per inspection Production scheduling $16 per production order Purchasing $4 per purchase order The activity-base usage quantities and units produced for each product were as follows: Stationary Bicycle Treadmill Machine hours 2,210 1,090 Direct labor hours 470 200 Setups 40 10 Inspections 650 370 Production orders 60 40 Purchase orders 150 80 Units produced 1,000 1,000 Use the activity rate and usage information to compute the total activity costs and the activity costs per unit for each product. If required, round your answers to two decimal places. Activity Stationary Bicycle Activity Cost Treadmill Activity Cost Fabrication Assembly Setup Inspecting Production scheduling Purchasing Total Number of units Activity cost per unit
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Activity-Based Costing
Cardio Care Inc. manufactures stationary bicycles and treadmills. The products are produced in the Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:
| Activity | Activity Rate |
| Fabrication | $22 per machine hour (mh) |
| Assembly | $14 per direct labor hour (dlh) |
| Setup | $40 per setup |
| Inspecting | $20 per inspection |
| Production scheduling | $16 per production order |
| Purchasing | $4 per purchase order |
The activity-base usage quantities and units produced for each product were as follows:
| Stationary Bicycle | Treadmill | ||||
| Machine hours | 2,210 | 1,090 | |||
| Direct labor hours | 470 | 200 | |||
| Setups | 40 | 10 | |||
| Inspections | 650 | 370 | |||
| Production orders | 60 | 40 | |||
| Purchase orders | 150 | 80 | |||
| Units produced | 1,000 | 1,000 |
Use the activity rate and usage information to compute the total activity costs and the activity costs per unit for each product. If required, round your answers to two decimal places.
| Activity | Stationary Bicycle Activity Cost |
Treadmill Activity Cost |
|||||
| Fabrication | |||||||
| Assembly | |||||||
| Setup | |||||||
| Inspecting | |||||||
| Production scheduling | |||||||
| Purchasing | |||||||
| Total | |||||||
| Number of units | |||||||
| Activity cost per unit |
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