Product costs using activity rates Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows: Activity Activity Rate Fabrication $32 per machine hour Assembly $34 per direct labor hour Setup $86 per setup Inspecting $24 per inspection Production scheduling $23 per production order Purchasing $14 per purchase order The activity-base usage quantities and units produced for each product were as follows: Activity Base Elliptical Machines Treadmill Machine hours 650 450 Direct labor hours 192 257 Setups 37 37 Inspections 31 38 Production orders 30 20 Purchase orders 318 93 Units produced 530 420 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below. Open spreadsheet Use the activity rate and usage information to calculate the total activity cost and activity cost per unit for each product. If required, round the per unit answers to the nearest cent. Total Activity Cost Activity Cost Per Unit Elliptical Machines $fill in the blank 2 $fill in the blank 3 Treadmill $fill in the blank 4 $fill in the blank 5
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Product costs using activity rates
Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:
| Activity | Activity Rate | |
| Fabrication | $32 | per machine hour |
| Assembly | $34 | per direct labor hour |
| Setup | $86 | per setup |
| Inspecting | $24 | per inspection |
| Production scheduling | $23 | per production order |
| Purchasing | $14 | per purchase order |
The activity-base usage quantities and units produced for each product were as follows:
| Activity Base | Elliptical Machines | Treadmill | ||
| Machine hours | 650 | 450 | ||
| Direct labor hours | 192 | 257 | ||
| Setups | 37 | 37 | ||
| Inspections | 31 | 38 | ||
| Production orders | 30 | 20 | ||
| Purchase orders | 318 | 93 | ||
| Units produced | 530 | 420 |
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below.
Use the activity rate and usage information to calculate the total activity cost and activity cost per unit for each product. If required, round the per unit answers to the nearest cent.
| Total Activity Cost | Activity Cost Per Unit | |
| Elliptical Machines | $fill in the blank 2 | $fill in the blank 3 |
| Treadmill | $fill in the blank 4 | $fill in the blank 5 |
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