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 $171,100 Number of machine hours 45,100 Number of design hours 66,123 Number of batches Estimated Cost Driver 59,000 5,500 465 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

Answer 1

Ans. 1 Activity Cost Pools Machining Designing costs Setup costs Total Cost of Pool (a) $171,100 $45,100 Estimated Cost Driver (b) 59000 Number of machine hours 5500 Number of design hours 465 Number of batches Activity rate (a/b) $2.90 per machine hour $8.20 per design hour $142.20 $66,123 per batch *Activity rate = Total cost of pool / Estimated cost driver Ans. 2 Machining Design Unit level activity Product level activity Batch level activity Setup

*Machininng is known as unit level because this activity is based on volume (machine hours).
*Designing cost incurred in the proportion of product to be designed, so this is a product level activity.
*Setup cost is based on batches so this is a batch level activity.