Hercules Industries - Activity-Based Costing
accountguruHercules Industries - Activity-Based Costing
Activity-Based Costing
Hercules Industries manufactures two types of electrical power units, custom and standard, which involve four overhead activities—production setup, procurement, quality control, and materials management. An activity analysis of the overhead revealed the following estimated costs and activity bases for these activities:
Activity | Cost | Activity Base | |
Production setup | $ 84,500 |
| Number of setups |
Procurement | 160,000 |
| Number of purchase orders (PO) |
Quality control | 224,000 |
| Number of inspections |
Materials management | 136,500 |
| Number of components |
Total | $605,000 |
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The activity-base usage quantities for each product are as follows:
| Setups | Purchase | Inspections | Components | Unit Volume | |||||
Custom | 450 |
| 1,200 |
| 2,400 |
| 400 |
| 2,000 |
|
Standard | 200 |
| 400 |
| 800 |
| 300 |
| 2,000 |
|
Total | 650 |
| 1,600 |
| 3,200 |
| 700 |
| 4,000 |
|
a. Determine an activity rate for each activity.
Activity Rates | Production Setup | Procurement | Quality Control | Materials Management | ||||
Activity cost | $ |
| $ |
| $ |
| $ |
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Activity base |
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Activity rate | $ | /setup | $ | /PO | $ | /inspection | $ | /component |
b. Assign activity costs to each product, and determine the unit activity cost using the activity rates from part (a). Round unit costs to the nearest cent.
| Custom | Standard | ||
Setups Total | $ |
| $ |
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Purchase Orders Total |
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Inspections Total |
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Components Total |
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Total product cost | $ |
| $ |
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Unit volume |
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Unit cost | $ |
| $ |
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c. Assume that each product required one direct labor hour per unit. Determine the per unit cost if factory overhead is allocated on the basis of direct labor hours. Round your answer to the nearest cent.
11 years ago
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hercules_industries_-_activity-based_costing.xlsx
