Elmwood Company has identified seven activities as part of its manufacturing process and chosen corresponding activity drivers for each activity. The chart below lists the total cost of each activity, the amount of activity driver used for each of Elmwood's two products, the activity rate, and the activity cost assigned to each product. Fill in the blanks below:ActivityCostActivity DriverDriver UsageActivity RateActivity Cost: Prod. 1Activity Cost: Prod. 2???Prod. 1Prod. 2???Design$20,000Design time1,600 hours2,400 hoursa.b.c.Preparation$12,000Labor hours3,000 hoursd.e.$6,000f.Machining$45,000Machine
hoursg.h.$9.00/hour$27,000i.Finishingj.Batches100150$100/batchk.l.Inspectionm.Unitsn.o.$4/unit$8,000$6,000Packagingp.Ordersq.50$90/order$13,500r.Shipping$5,000Packages70s.t.u.$1,500
What will be an ideal response?
a. $5.00 = $20,000/(1,600 + 2,400)
b. $8,000 = 1,600 × $5.00
c. $12,000 = 2,400 × $5.00
d. 3,000 = $6,000 (see f)/$2.00 (see e)
e. $2.00 = $6,000/3,000
f. $6,000 = $12,000 ? $6,000
g. 3,000 = $27,000/$9.00
h. 2,000 = ($45,000/$9.00) ? 3,000 or $18,000 (see i)/$9.00
i. $18,000 = $45,000 ? $27,000
j. $25,000 = (100 + 150) × $100
k. $10,000 = 100 × $100
l. $15,000 = 150 × $100
m. $14,000 = $8,000 + $6,000
n. 2,000 = $8,000/$4
o. 1,500 = $6,000/$4
p. $18,000 = $13,500 + $4,500 (see r)
q. 150 = $13,500/$90
r. $4,500 = 50 × $90
s. 30 = $1,500/$50 (see t)
t. $50 = $3,500 (see u)/70
u. $3,500 = $5,000 ? $1,500
Activity rate = Cost/Total activity driver usage. Activity rate × Activity driver usage = Activity cost. Total cost = Sum of activity costs.
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