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 |
|
$430,700 |
|
| Setup |
|
165,600 |
|
| Moving |
|
70,200 |
|
| Shipping |
|
149,600 |
|
| Product Engineering |
|
44,800 |
|
|
Total |
|
$860,900 |
|
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:
|
|
Machine Hours |
Number of
Setups |
Number of
Moves |
Number of
Customer Orders |
Number of
Test Runs |
Units |
| Computer Paper |
3,210 |
100 |
180 |
880 |
40 |
8,025 |
| Newsprint |
2,040 |
150 |
270 |
2,420 |
250 |
5,100 |
| Specialty Paper |
2,050 |
150 |
450 |
1,100 |
110 |
5,125 |
|
Total |
7,300 |
400 |
900 |
4,400 |
400 |
18,250 |
Each product requires 0.9 machine hour per unit.
If required, round all per unit amounts to the nearest cent.
1. Determine the activity 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 |
$ |
$ |