Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:
Activity Cost Pool | Estimated Overhead Cost |
Expected Activity |
|||
Labor-related | $ | 52,000 | 8,000 | direct labor-hours | |
Machine-related | $ | 15,000 | 20,000 | machine-hours | |
Machine setups | $ | 42,000 | 1,000 | setups | |
Production orders | $ | 18,000 | 500 | orders | |
Product testing | $ | 48,000 | 2,000 | tests | |
Packaging | $ | 75,000 | 5,000 | packages | |
General factory | $ | 108,800 | 8,000 | direct labor-hours | |
Exercise 4-2 Part 1
Required:
1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
Activity Cost Pool | Activity rates | |
Labor-related ( $52,000 / 8,000 DLH ) | $ 6.50 | per DLH |
Machine-related ( $15,000 / 20,000 MH ) | $ 0.75 | per MH |
Machine setups ( $42,000 / 1,000 setups ) . | $ 42.00 | per setup |
Production orders ( $18,000 / 500 orders ) | $ 36.00 | per order |
Product testing ( $48,000 / 2,000 tests ) | $ 24.00 | per test |
Packaging ( $75,000 / 5,000 packages ) | $ 15.00 | per package |
General factory ( $108,800 / 8,000 DLH ) | $ 13.60 | per DLH |
The answer to the Predetermined Overhead rate is 44.85 per DLH.
2. Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours. (Round your answer to 2 decimal places.)
2.
The predetermined overhead rate based entirely on direct labor-hours would be computed as follows:
Total estimated overhead cost (a) | $ 358,800 | |
---|---|---|
Total expected direct labor-hours (b) | 8,000 | DLHs |
Predetermined overhead rate (a) ÷ (b) | $ 44.85 | per DLH |
Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the...
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