Testbank Exercise 2 Megan Industries manufactures several products including a basic case for a popular smart phone. The company is considering adopting an activity-based costing approach for setting its budget. The company's production activities, budgeted activity costs, and cost drivers for the coming year are as follows.
| Activity |
Activity overhead $ |
Cost driver |
Cost driver quantity |
| Machine setup |
$191,880 |
# of setups |
820 |
| Inspection |
193,380 |
# of quality tests |
530 |
| Materials receiving |
185,110 |
# of purchase orders |
1,730 |
The budgeted data for smart phone case production are as follows.
| Direct materials |
$2.60 |
per unit |
| Direct labor |
$0.61 |
per unit |
| Number of setups |
97 |
| Number of quality tests |
433 |
| Number of purchase orders |
59 |
| Production |
18,000 |
units |