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2. Management is considering using activity-based costing to assign manufacturing overhead cost to products. The activity-based costing system would have the following four activity cost pools: Activity Cost Pool Maintaining parts inventory Processing purchase orders Quality control Machine-related Activity Measure Number of part types Number of purchase orders Number of tests run Machine-hours Estimated Overhead Cost $ 258,000 80,000 32,000 550,000 $ 920,000 Activity Measure Number of part types Number of purchase orders Number of tests run Machine-hours Expected Activity LEC 40 LEC 90 Total 750 1,400 2,150 1,600 400 2,000 1,400 1,800 3,200 4,000 6,000 10,000 Determine the activity rate for each of the four activity cost pools. (Round your answers to 2 decimal places.) Activity Cost Pool Maintaining inventory Processing purchase orders Quality control Machine-related Activity Rate $ 120.00 per part type $ 40.00 per order $ 10.00 per test $ 55.00 per MH

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Answer 1

Activity Cost Pools Maintaining parts inventory Processing purchase orders Quality control Machine-related Cost drivers No.of part types $ No.of Purchase orders $ No.of tests run $ Machine-hours $ $ OH COST 258,000 80,000 32,000 550,000 920,000 Activity level 2,150 $ 2,000 $ 3,200 $ 10,000 $ Activity Rate 120.00 40.00 10.00 55.00 Activity Cost Pools Maintaining parts inventory Processing purchase orders Quality control Machine-related Total Costs assigned(a) Units Produced (b) Manufacturing Overhead Cost per unit[(a)*(b)] LEC 40 Estimated Use of Drivers Activity-Based OH Rate 750 120.00 $ 1,600 40.00 $ 1,400 10.00 $ 4,000 55.00 $ $ LEC 90 Cost Assigned Estimated Use of Drivers Activity-Based OH Rate 90,000 1,400 120.00 $ 64,000 400 40.00 $ 14,000 1,800 10.00 $ 220.000 6,000 55.00 $ 388,000 $ 80,000 Cost Assigned 168,000 16,000 18,000 330,000 532,000 40,000 $ 4.85 $ 13.30 $ 4.85 Manufacturing Overhead Cost per 3A unit LEC 40 Manufacturing Overhead Cost per unit LEC 90 $ 13.30 LEC 40 $ LEC 90 46.00 9.00 Direct Material Direct Labor Manufacturing Overhead Cost Unit Product Cost $ $ $ 20.00 $ 3.00 $ 4.85$ 27.85$ 13.30 68.30 3B Unit Product Cost for LEC 40 Unit Product Cost for LEC 90 $ $ 27.85 68.30

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