Question

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Procurement Scheduling Materials handling Product development Production Activity Cost Activity Base $347,800 Number of purchase orders 205,800 Number of production orders 491,900 Number of moves 779,400 Number of engineering changes 1,418,700 Machine hours Number of Engineering Machine Changes Hours 12 2,300 Number of Units Number of Number of Number Purchase Production of Orders Orders Moves Disk des 4,070 420 1,270 Tape drives 2,400 195 590 Wire drives 12.200 710 3,900 The activity-based cost for each disk drive unit is 5 9,800 1,900 4,000 2,900 22 11,300 5330.94 151663 65619.11

Answer 1

Solution: $330.94
Working:

   Purchase orders   Production orders   No. of moves   No. of engg. Changes   Machine hours   No. of units     
Disk drives   4070   420   1270   12   2300   1900     
Tape drives   2400   195   590   5   9800   4000     
Wire drives   12200   710   3900   22   11300   2900     
   18670   1325   5760   39   23400   8800     
  
   A   B   C = A/B   D = Disk drives   E = C * D     
Procurement   347,800   18670   18.63   4070   75819.28     
Scheduling   205,800   1325   155.32   420   65234.72     
Materials handling   491,900   5760   85.40   1270   108457.12     
Product development   779,400   39   19984.62   12   239815.38     
Production   1,418,700   23400   60.63   2300   139444.87     
                   628771.37     

The activity-based cost of each disk drive unit is 628771.37 / 1900 units = 330.93