Question

Patten Company uses activity-based costing (ABC). Patten manufactures toy cars using two activities: plastic injection molding and decal application. Patten’s 20X1 total budgeted overhead costs for these two activities are $413,000 (80% for injection molding and 20% for decal application). Molding overhead costs are driven by the number of pounds of plastic that are molded together. Decal application overhead costs are driven by the number of decals applied to toys. The budgeted activity data for 20X1 are as follows:

Pounds of plastic molded	1,900,000
Number of decals applied	346,000

Required:

1. Calculate the activity rate for the plastic injection molding activity. Round your answer to the nearest cent.
$ per pound molded

2. Calculate the activity rate for the decal application activity. Round your answer to the nearest cent.
$ per decal applied

Answer 1

Answer :

1) Activity rate for plastic injection modeling :

Activity rate = Apportioned budgeted overhead cost ÷ budgeted Activity

Apportioned budgeted overhead cost = $4,13,000 × 80%

= $3,30,400

And budgeted Activity (given) = $1,900,000

Therefore

Activity rate = $3,30,400 ÷ $1,900,000 = $0.17 per pound molded

2) Activity rate for decal application :

Apportioned budgeted overhead cost = $4,13,000 × 20%

= $82,600

Budgeted Activity = $3,46,000

Activity rate = $82,600 ÷ $3,46,000 = $0.24 per decal applied