Computing product cost with given activity allocation ratesUsing automated production proc

Computing product cost with given activity allocation rates

Using automated production processes, Raspino Videos produces two kinds of camcorders. N100 is an analog recorder and D200 is a digital recorder. The company has found activity-based costing useful in assigning overhead costs to its products. It has identified the following five major activities involved in producing the camcorders.

Activity

Allocation Base

Allocation Rate

Materials receiving and handling

Cost of materials

3% of materials cost

Production setup

Number of setups

$800 per setup

Assembly

Number of parts

$10 per part

Quality inspection

Inspection time

$25 per minute

Packing and shipping

Number of orders

$80 per order

Activity measures for the two kinds of camcorders follow.

 Labor

Cost*Materials

Cost*Number

of SetupsNumber

of PartsInspection

TimeNumber

of Orders

N100

$450,000

$250,000

10

10,000

800 min.

25

D200

300,000

300,000

25

10,000

4,800 min.

50

Required

a. Compute the cost per unit of N100 and D200, assuming that Raspino made 1,000 units of each type of camcorder.

b. Explain why the D200 digital camcorders cost more to make although their direct costs are less than those for the N100 analog camcorders.

 

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