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: 1ActivityActivity Cost Pool2Production$259,200.003Setup55,000.004Material handling9,750.005Inspection60,000.006Product engineering123,200.007Total$507,150.00 The activity bases identified for each activity are as follows:ActivityActivity BaseProductionMachine hoursSetupNumber of setupsMaterial handlingNumber of partsInspectionNumber of inspection hoursProduct engineeringNumber of engineering hours The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: MachineNumber ofNumber ofNumber ofNumber of HoursSetupsPartsInspection HoursEngineering HoursUnitsAlpha1,44075654001251,800Beta1,080165803001751,350Omega720310180500140900Total3,2405503251,2004404,050 Each product requires 40 minutes per unit of machine time. Required: Complete the Activity Tables for Alpha, Beta and Omega.1.Determine the activity rate for each activity.*2.Use the activity rates in (1) to determine the total and per-unit activity costs associated with 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? *If required, round all per-unit amounts to the nearest cent. Complete the Activity Table for Alpha.1.Determine the activity rate for each activity. Enter these rates in the Activity Rate columns.*2.Use the activity rates in (1) to determine the total and per-unit activity costs associated with Alpha.* *If required, round all per-unit amounts to the nearest cent. AlphaActivityActivity- Base Activity ActivityUsageXRate=CostProduction mh /mh Setup setups /setup Material handling parts /part Inspection insp. hours /hour Product Engineering eng. hours /hour Total activity cost Number of units Activity cost per unit Complete the Activity Table for Beta.1.Determine the activity rate for each activity. Enter these rates in the Activity Rate columns.*2.Use the activity rates in (1) to determine the total and per-unit activity costs associated with Beta.* *If required, round all per-unit amounts to the nearest cent. BetaActivityActivity- Base Activity ActivityUsageXRate=CostProduction mh /mh Setup setups /setup Material handling parts /part Inspection insp. hours /hour Product Engineering eng. hours /hour Total activity cost Number of units Activity cost per unit Complete the Activity Table for Omega.1.Determine the activity rate for each activity. Enter these rates in the Activity Rate columns.*2.Use the activity rates in (1) to determine the total and per-unit activity costs associated with Omega.* *If required, round all per-unit amounts to the nearest cent. OmegaActivityActivity- Base Activity ActivityUsageXRate=CostProduction mh /mh Setup setups /setup Material handling parts /part Inspection insp. hours /hour Product Engineering eng. hours /hour Total activity cost Number of units Activity cost per unit

1) Calculation of Activity rate for each activity (Amount in $) Activity Activity cost pool…

Answered: Mello Manufacturing Company is a…

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 4PA: Activity-based product costing Mello Manufacturing Company is a diversified manufacturer that...

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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:

1	Activity	Activity Cost Pool
2	Production	$259,200.00
3	Setup	55,000.00
4	Material handling	9,750.00
5	Inspection	60,000.00
6	Product engineering	123,200.00
7	Total	$507,150.00

The activity bases identified for each activity are as follows:

Activity	Activity Base
Production	Machine hours
Setup	Number of setups
Material 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	Number of	Number of	Number of	Number of
	Hours	Setups	Parts	Inspection Hours	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 40 minutes per unit of machine time.

Required:

Complete the Activity Tables for Alpha, Beta and Omega.

1.	Determine the activity rate for each activity.*
2.	Use the activity rates in (1) to determine the total and per-unit activity costs associated with 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?
	*If required, round all per-unit amounts to the nearest cent.

Complete the Activity Table for Alpha.

1.	Determine the activity rate for each activity. Enter these rates in the Activity Rate columns.*
2.	Use the activity rates in (1) to determine the total and per-unit activity costs associated with Alpha.*
	*If required, round all per-unit amounts to the nearest cent.

	Alpha
Activity	Activity-
Base		Activity		Activity
Usage	X	Rate	=	Cost
Production	mh		/mh
Setup	setups		/setup
Material handling	parts		/part
Inspection	insp. hours		/hour
Product Engineering	eng. hours		/hour
Total activity cost
Number of units
Activity cost per unit

Complete the Activity Table for Beta.

1.	Determine the activity rate for each activity. Enter these rates in the Activity Rate columns.*
2.	Use the activity rates in (1) to determine the total and per-unit activity costs associated with Beta.*
	*If required, round all per-unit amounts to the nearest cent.

	Beta
Activity	Activity-
Base		Activity		Activity
Usage	X	Rate	=	Cost
Production	mh		/mh
Setup	setups		/setup
Material handling	parts		/part
Inspection	insp. hours		/hour
Product Engineering	eng. hours		/hour
Total activity cost
Number of units
Activity cost per unit

Complete the Activity Table for Omega.

1.	Determine the activity rate for each activity. Enter these rates in the Activity Rate columns.*
2.	Use the activity rates in (1) to determine the total and per-unit activity costs associated with Omega.*
	*If required, round all per-unit amounts to the nearest cent.

	Omega
Activity	Activity-
Base		Activity		Activity
Usage	X	Rate	=	Cost
Production	mh		/mh
Setup	setups		/setup
Material handling	parts		/part
Inspection	insp. hours		/hour
Product Engineering	eng. hours		/hour
Total activity cost
Number of units
Activity cost per unit

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