Question

Required information Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows: Activity Cost Pools Machining Designing costs Setup costs Total Cost of Pool Cost Driver $ 250,680 Number of machine hours 61,600 Number of design hours 66,482 Number of batches Estimated Cost Driver 71,600 7.ee 465 Required: 1. Compute the activity rate for each activity 2. Classify each activity as facility, product, batch, or unit level. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the activity rate for each activity. (Round your answers to 2 decimal places.) Activity Rate Activity Machining Design Costs Setup per Machine Hour per Design Hour per Batch Regledi Required 2 >

Answer 1

(1)

Activity rate for each activity = (Activity cost pools/ Cost drivers)
Using the above formula, we can find the Activity rate for each of the Cost Activity given:

Machining = (Machine Total cost/ Number of Machine hours) = (($250600 / $71600) = $3.5 per machine hour
Design cost = (Design Total cost/ Number of Design hours) = ($61600/ $7000) = $8.8 per design hour
Setup cost = (Setup Total cost/ Number of batches) = ($66402/ $465) = $142.95 per batch

(2)

Machining basically involves all machine related costs associated with manufacturing a unit of product such as different manufacturing processes in order to convert a raw material into a finished product.
Thus Machining activity can be classified as Unit Level Activity

Design cost is cost which varies depending on what specific or differentiated product a company produces and what are different costs it demands for the very production process.
Thus, design activity can be classified as Product Level Activity

Setup Cost basically involves cost associated with setting up different machines and other related expenses for production of a specific and predetermined batch of the product.
Thus, Setup activity can be classified as Batch Level Activity