Question

Instructions 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 $242,089.00 3 Setup 88,425.00 4. Material handling 9,253.00 5 Inspection 49,623.00 6 Product engineering 167,990.00 7 Total $557,380.00

Answer 1

Answer

• Requirement 1

Activity	Expected Costs	Expected Activity		Activity Rate
Production	$      242,089.00	2,221	no of machine hours	$                 109.00	per no of machine hours
Setup	$         88,425.00	393	no. of setups	$                 225.00	per no. of setups
Material Handling	$           9,253.00	487	no of parts	$                   19.00	per no of parts
Inspection	$         49,623.00	973	inspection hours	$                   51.00	per inspection hours
Product engineering	$      167,990.00	535	engineering hours	$                 314.00	per engineering hours
TOTAL	$      557,380.00

• Requirement 2

Alpha
Activity	Activity Base Usage		Activity Rate		Activity Cost
Production	984	no of machine hours	$                                          109.00	no of machine hours	$        107,256.00
Setup	57	no. of setups	$                                          225.00	no. of setups	$           12,825.00
Material Handling	84	no of parts	$                                            19.00	no of parts	$             1,596.00
Inspection	441	inspection hours	$                                            51.00	inspection hours	$           22,491.00
Product engineering	125	engineering hours	$                                          314.00	engineering hours	$           39,250.00
Total Activity Cost					$        183,418.00
No. of units					1,366
Activity Cost per unit					$                 134.27
BETA
Activity	Activity Base Usage		Activity Rate		Activity Cost
Production	847	no of machine hours	$                                          109.00	no of machine hours	$           92,323.00
Setup	126	no. of setups	$                                          225.00	no. of setups	$           28,350.00
Material Handling	158	no of parts	$                                            19.00	no of parts	$             3,002.00
Inspection	284	inspection hours	$                                            51.00	inspection hours	$           14,484.00
Product engineering	191	engineering hours	$                                          314.00	engineering hours	$           59,974.00
Total Activity Cost					$        198,133.00
No. of units					991
Activity Cost per unit					$                 199.93
OMEGA
Activity	Activity Base Usage		Activity Rate		Activity Cost
Production	390	no of machine hours	109	no of machine hours	$           42,510.00
Setup	210	no. of setups	225	no. of setups	$           47,250.00
Material Handling	245	no of parts	19	no of parts	$             4,655.00
Inspection	248	inspection hours	51	inspection hours	$           12,648.00
Product engineering	219	engineering hours	314	engineering hours	$           68,766.00
Total Activity Cost					$        175,829.00
No. of units					475
Activity Cost per unit					$                 370.17