Activity Cost Rates

P 3.Noir Company produces four versions of its model J17-21 bicycle seat. The

four versions have different shapes, but their processing operations and production

costs are identical. During July, these costs were incurred:

Direct materials

Leather $25,430

Metal frame 39,180

Bolts 3,010

Materials handling

Labor 8,232

Equipment depreciation 4,410

Electrical power 2,460

Maintenance 5,184


Direct labor 13,230

Engineering design

Labor 4,116

Electrical power 1,176

Engineering overhead 7,644


Equipment depreciation 7,056

Indirect labor 30,870

Supervision 17,640

Operating supplies 4,410

Electrical power 10,584

Repairs and maintenance 21,168

Building occupancy overhead 52,920

July s output totaled 29,400 units. Each unit requires three machine hours of

effort. Materials handling costs are allocated to the products based on direct

materials cost, engineering design costs are allocated based on units produced,

and overhead is allocated based on machine hours. Assembly costs are allocated

based on direct labor hours, which are estimated at 882 for July.

During July, Noir Company completed 520 bicycle seats for Job 142. The

activity usage for Job 142 was as follows: direct materials, $1,150; direct labor

hours, 15.


1. Compute the following activity cost rates: (a) materials handling cost rate;

(b) assembly cost rate, (c) engineering design cost rate, and (d) overhead rate.

2. Prepare a bill of activities for Job 142.

3. Use activity-based costing to compute the job s total cost and product unit cost.

Breakeven Analysis

E 8.Techno Designs produces head covers for golf clubs. The company expects to

generate a profit next year. It anticipates fixed manufacturing costs of $126,500

and fixed general and administrative expenses of $82,030 for the year. Variable

manufacturing and selling costs per set of head covers will be $4.65 and $2.75,

respectively. Each set will sell for $13.40.

1. Compute the breakeven point in sales units.

2. Compute the breakeven point in sales dollars.

3. If the selling price is increased to $14 per unit and fixed general and administrative

expenses are cut by $33,465, what will the new breakeven point be

in units?

4. Prepare a graph to illustrate the breakeven point computed in2.