Caldwell Home Appliances Inc. is estimating the activity cost associated with producing ovens and refrigerators. The indirect labor can be traced into four separate activity pools, based on time records provided by the employees. The budgeted activity cost and activity-base information are provided as follows: Activity Activity Pool Cost Activity Base
Procurement $12,600 Number of purchase orders
Scheduling 90,000 Number of production orders
Materials handling 11,000 Number of moves
Product development 50,000 Number of engineering changes
Total cost $163,600
The estimated activity-base usage and unit information for two product lines was determined from corporate records as follows:
Number of Purchase Orders Number of Production Orders Number of Moves Number of Engineering Changes Units
Ovens 400 800 300 80 1,000
Refrigerators 300 400 200 120 500
Totals 700 1,200 500 200 1,500
a. Determine the activity rate for each activity cost pool.
Procurement (per purchase order) $
Scheduling (per production order) $
Materials handling (per move) $
Product development (per engineering change) $
b. Determine the activity-based cost per unit of each product.
Ovens $ per unit
Refrigerators $ per unit