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Funk Manu: Compute the activity rates for each process.

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Funk Manufacturing Company produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:

Engineering $125,000
Setups 112,500
Machining 250,000
Inspection 100,000

Activity drivers for each activity have been identified and their practical capacities listed:

Machine hours 50,000
Setups 400
Engineering hours 10,000
Inspection hours 5,000

a. Identify the activities within each process as unit-level, batch-level, product-level, or facility-level.

b. Prepare a summary of cost/activity data using the following format:
Overhead Total Cost Activity Estimated Cost per
Activity of Activity Driver Driver Level Driver

c. Compute the activity rates for each process.

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Solution Summary

Your tutorial is attached and gives reasons for the classification and a chart to help you solve for cost per driver and activity rates.

Solution provided by:
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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