Exercise 4-10 (E4-10) Identify activity cost drivers.
Anna Bellatorre, Inc. manufactures five models of kitchen appliances at its Mesa plant. The company is installing activity-based costing and has identified the following activities performed at its Mesa plant.
1. Designing new models.
2. Purchasing raw materials and parts.
3. Storing and managing inventory.
4. Receiving and inspecting raw materials and parts.
5. Interviewing and hiring new personnel.
6. Machine forming sheet steel into appliance parts.
7. Manually assembling parts into appliances.
8. Training all employees of the company.
9. Insuring all tangible fixed assets.
10. Supervising production.
11. Maintaining and repairing machinery and equipment.
12. Painting and packaging finished appliances.
Having analyzed its Mesa plant operations for purposes of installing activity-based costing, Anna Bellatorre, Inc. identified its activity cost centers. It now needs to identify relevant activity cost drivers in order to assign overhead costs to its products.
Using the activities listed above, identify for each activity one or more cost drivers that might be used to assign overhead to Anna Bellatorre’s five products.
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