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Tatman Corporation uses an activity-based costing system with the following three activity cost
pools:
Activity Cost Pool Total Activity

Fabrication ......................... 10,000 machine-hours
Order processing................ 800 orders
Other .................................. Not applicable
The Other activity cost pool is used to accumulate costs of idle capacity and organization-
sustaining costs.
The company has provided the following data concerning its costs:
Wages and salaries ............ $320,000

Depreciation ...................... 220,000
Occupancy ......................... 120,000
Total................................... $660,000
The distribution of resource consumption across activity cost pools is given below:
Activity Cost Pools

Order
Fabrication Processing Other Total
Wages and salaries ...... 20% 65% 15% 100%
Depreciation ................ 15% 35% 50% 100%
Occupancy ................... 5% 70% 25% 100%
The activity rate for the Fabrication activity cost pool is closest to:
The activity rate for the Order Processing activity cost pool is closest to:
Dobles Corporation has provided the following data from its activity-based costing system:
Activity Cost Pool Total Cost Total Activity

Assembly ..................... $228,060 18,000 machine-hours
Processing orders ......... $34,068 1,200 orders
Inspection .................... $125,560 1,720 inspection-hours
The company makes 420 units of product D28K a year, requiring a total of 460 machine-
hours, 80 orders, and 10 inspection-hours per year. The product's direct materials cost is
$48.96 per unit and its direct labor cost is $25.36 per unit.
According to the activity-based costing system, the average cost of product D28K is closest to:
Hane Corporation uses the following activity rates from its activity-based costing to assign
overhead costs to products:
Activity Cost Pools Activity Rate

Assembling products ..................... $8.90 per assembly hour
Processing customer orders ........... $31.23 per customer order
Setting up batches .......................... $43.72 per batch
Data for one of the company’s products follow:
Product U94W
Number of assembly hours ............ 389
Number of customer orders ........... 53
Number of batches......................... 61
How much overhead cost would be assigned to Product U94W using the activity-based costing
system?
Toylandia Company manufactures two products, X-MAN and Machman. Toylandia's overhead
costs consist of setting up machines, P400,000; machining, P900,000; and inspecting, P300,000.
Information on the two products is:
X-MAN Machman
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Machman using activity-based costing is
Overhead applied to Machman using traditional costing is

HiTech Products manufactures three types of remote-control devices: Economy, Standard, and
Deluxe. The company, which uses activity-based costing, has identified five activities (and
related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below.
Activity Cost Cost Driver

Material handling $ 225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated machinery 840,000 Machine hours
Finishing 170,000 Direct labor hours
Packaging 170,000 Orders shipped
Total $3,880,000
The following information pertains to the three product lines for next year:
Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per unit 10 15 25
Machine hours per unit 1 3 5
Labor hours per unit 2 2 2
What is HiTech's cost application rate for the material-handling activity?
What is HiTech's cost application rate for the automated machinery activity?
What is HiTech's cost application rate for the finishing activity?
What is HiTech's cost application rate for the packaging activity?
Under an activity-based costing system, what is the per-unit cost of Economy?
Under an activity-based costing system, what is the per-unit cost of Standard?
Under an activity-based costing system, what is the per-unit cost of Deluxe?
Assume that HiTech is using a volume-based costing system, and the preceding manufacturing
costs are applied to all products based on direct labor hours. How much of the preceding cost
would be assigned to Deluxe?
HIERARCY OF ACTIVITY LEVELS
1. Unit-level Activities – are performed each time a unit is produced.
Examples:
Direct Labor
Direct Material
Machine Hours
2. Batch-level Activities – performed each time a batch is handled or processed, regardless of

how many units are in the batch.
Examples:
Setup Cost
Material Handling
Inspection Cost
3. Product-level (Sustaining) Activities – relate to specific products and typically must be carried
out regardless of how many batches are run or units of product are produced or sold.
Examples:
Product Design Cost
Engineering Changes
Introducing New Product
4. Organization-sustaining activities - carried out regardless of which customers are served,

which products are produced, how many batches are run, or how many units are made.
Examples:
Landscaping Cost
Security
Property Taxes
Plant Depreciation

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Tatman Corporation uses an activity-based costing system with the following three activity cost

Activity Cost Pool Total Activity

Wages and salaries ............ $320,000

Activity Cost Pools

Activity Cost Pool Total Cost Total Activity

Activity Cost Pools Activity Rate

Data for one of the company’s products follow:

Overhead applied to Machman using activity-based costing is

Overhead applied to Machman using traditional costing is

Activity Cost Cost Driver

Economy Standard Deluxe

What is HiTech's cost application rate for the material-handling activity?

What is HiTech's cost application rate for the finishing activity?

What is HiTech's cost application rate for the packaging activity?

Under an activity-based costing system, what is the per-unit cost of Economy?

Under an activity-based costing system, what is the per-unit cost of Standard?

Under an activity-based costing system, what is the per-unit cost of Deluxe?

2. Batch-level Activities – performed each time a batch is handled or processed, regardless of

4. Organization-sustaining activities - carried out regardless of which customers are served,

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