Process activity analysis roen company incurred an activity cost of $105,600 for inspecting 40,000 units of production. management determined that the inspecting objectives could be met without inspecting every unit. therefore, rather than inspecting 40,000 units of production, the inspection activity was limited to a random selection of 5,000 units out of the 40,000 units of production. determine the inspection activity cost per unit on 40,000 units of total production both before and after the improvement. if required, round per unit amounts to the nearest cent. inspection activity before improvement $ per unit inspection activity after improvement $ per unit

The answer is $2.64 per unit and $13.2%

Explanation:

Solution

Given that:

The formula for calculating inspection activity of inspection before improvement is stated below:

Inspection Activity before Improvement = Total Activity Cost/Total Units of Production

Using the values provided in the question, we have,

Inspection Activity before Improvement = 105,600/40,000 = 2.64 per unit

Now,

he formula for calculating inspection activity after improvement is given below:

Inspection Activity after Improvement = (Total Activity Cost*Inspection Activity Percentage) / Total Units of Production

Using the values provided in the question, we get,

The Inspection Activity after Improvement = (105,600*5000) / 40,000 = $13,200 per unit or $13.2 per unit