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 |
$217,600 |
# of setups |
850 |
| Inspection |
149,930 |
# of quality tests |
470 |
| Materials receiving |
177,620 |
# of purchase orders |
1,660 |
The budgeted data for smart phone case production are as follows.
| Direct materials |
$2.80 |
per unit |
| Direct labor |
$0.64 |
per unit |
| Number of setups |
85 |
| Number of quality tests |
394 |
| Number of purchase orders |
61 |
| Production |
18,720 |
units |
(a) Calculate the activity rate for each cost pool.
(b) Calculate the activity-based unit cost of the smart phone case.