Teldar Paper Company manufactures three products (computer paper, newsprint, and specialty paper) in a continuous

Teldar 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                               $640,000

Setup                                          211,200

Moving                                          35,100

Shipping                                      131,625

Product Engineering                  161,500

     Total                                   $1,179,425

The activity 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:

                                                                                     Number of                  

                        Machine        Number of       Number of       Customer          Number of      

                        Hours             Setups              Moves               Orders           Test Runs        Units

Computer Paper  1,400          180                     400                 660                   120          1,750

Newsprint           1,600             75                    165                 210                    40           2,000

Specialty Paper   1,000          405                     605                 885                   220          1,250

     Total            4,000            660                   1,170              1,755                 380            5,000

Each product requires 0.8 machine hour per unit.

Required:

If required, round all per unit amounts to the nearest cent.

1.  Determine the activity rate for each activity.

Production  

Setup 

Moving 

Shipping  

Product Engineering 

2. Determine the total and per-unit activity cost for all three products.

                          Total Activity Cost        Activity Cost Per Unit

Computer Paper 

Newsprint

Specialty Paper