compute the indirect manufacturing cost of each motorcycle 556824

Product costing in an activity based costing system

Turbo Champs, Corp., uses activity based costing to account for its motorcycle manufacturing process. Company managers have identified three supporting manufacturing activities: inspection, machine setup, and machine maintenance. The budgeted activity costs for 2012 and their allocation bases are as follows:

Activity

Total Budgeted Cost

Allocation Base

Inspection

$ 6,000

Number of inspections

Machine setup

32,000

Number of setups

Machine maintenance

5,000

Maintenance hours

Total

$ 43,000

Turbo Champs expects to produce 20 custom built motorcycles for the year. The motorcycles are expected to require 100 inspections, 20 setups, and 100 maintenance hours.

Requirements

1. Compute the cost allocation rate for each activity.

2. Compute the indirect manufacturing cost of each motorcycle.

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