7-8 Calculating product costs using activity-based costing (CIMA adapted)
(LO 2) Wieters Industries manufactures several products including a basic case for a popular
smartphone. 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 $ 200,000 # of setups 800
Inspection 120,000 # of quality tests 400
Materials receiving 252,000 # of purchase orders 1,800
The budgeted data for smartphone case production are as follows.
Direct materials $2.50 per unit
Direct labor $0.54 per unit
Number of setups 92
Number of quality tests 400
Number of purchase orders 50
Production 15,000 units
a. Calculate the activity rate for each cost pool.
b. Calculate the activity-based unit cost of the smartphone case.