7 8 Calculating Product Costs Using Activity Based Costing Cima Adapted Lo 2 Wieters 2391846

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

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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.