Activity based product costing
Alabama Paper Company manufactures three products (computer paper, newsprint, and specialty paper) 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:
| Activity | Activity Cost Pool | |||
|---|---|---|---|---|
| Production | $451,400 | |||
| Setup | 263,200 | |||
| Moving | 72,000 | |||
| Shipping | 152,000 | |||
| Product Engineering | 92,400 | |||
| Total | $1,031,000 | |||
Theactivity bases identified for each activity are as follows:
| Activity | Activity Base |
| Production | Machine hours |
| Setup | Number of setups |
| Moving | Number of moves |
| Shipping | Number of customer orders |
| Product Engineering | Number of test runs |
The activity base usage quantities and units produced for the three products were determined from corporate records and are as follows:
| Machine Hours | Number of Setups |
Number of Moves |
Number of Customer Orders |
Number of Test Runs |
Units | ||
| Computer Paper | 3,260 | 180 | 180 | 760 | 70 | 8,150 | |
| Newsprint | 2,070 | 270 | 270 | 2,090 | 440 | 5,175 | |
| Specialty Paper | 2,070 | 250 | 450 | 950 | 190 | 5,175 | |
| Total | 7,400 | 700 | 900 | 3,800 | 700 | 18,500 | |
Each product requires 0.9 machine hour per unit.
If required, round all per unit amounts to the nearest cent.
1. Determine theactivity rate for each activity.
| Production | $ per machine hour |
| Setup | $ per setup |
| Moving | $ per move |
| Shipping | $ per cust. ord. |
| Product Engineering | $ per test run |
2. Determine the total and per unit activity cost for all three products. Round per unit answers to the nearest cent.
| Total Activity Cost | Activity Cost per Unit | |
| Computer Paper | $ | $ |
| Newsprint | $ | $ |
| Specialty Paper | $ | $ |
3. Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit?
The input in the box below will not be graded, but may be reviewed and considered by your instructor.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
