Teldar Paper Company manufactures three products (computer paper, newsprint, and specialty paper) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

Activity Activity Cost Pool

Production $640,000

Setup 211,200

Moving 35,100

Shipping 131,625

Product Engineering 161,500

Total $1,179,425

The activity bases identified for each activity are as follows:

Activity Activity Base

Production Machine hours

Setup Number of setups

Moving Number of moves

Shipping Number of customer orders

Product engineering Number of test runs

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

Number of

Machine Number of Number of Customer Number of

Hours Setups Moves Orders Test Runs Units

Computer Paper 1,400 180 400 660 120 1,750

Newsprint 1,600 75 165 210 40 2,000

Specialty Paper 1,000 405 605 885 220 1,250

Total 4,000 660 1,170 1,755 380 5,000

Each product requires 0.8 machine hour per unit.


If required, round all per unit amounts to the nearest cent.

1. Determine the activity rate for each activity.





Product Engineering

2. Determine the total and per-unit activity cost for all three products.

Total Activity Cost Activity Cost Per Unit

Computer Paper


Specialty Paper