Question:
Product costing in an activity-based costing system
Turbo Champs, Corp., uses activity-based costing to account for its motorcycle manufacturing process. Company managers have identified three supporting manufacturing activities: inspection, machine setup, and machine maintenance. The budgeted activity costs for 2012 and their allocation bases are as follows:
|
Activity
|
Total Budgeted Cost
|
Allocation Base
|
|
Inspection
|
$ 6,000
|
Number of inspections
|
|
Machine setup
|
32,000
|
Number of setups
|
|
Machine maintenance
|
5,000
|
Maintenance hours
|
|
Total
|
$ 43,000
|
|
Turbo Champs expects to produce 20 custom-built motorcycles for the year. The motorcycles are expected to require 100 inspections, 20 setups, and 100 maintenance hours.
Requirements
1. Compute the cost allocation rate for each activity.
2. Compute the indirect manufacturing cost of each motorcycle.