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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
