Question

Adria Company recently Implemented an activity-based costing system. At the beginning of the year, management made the follow
Required: 1. Compute the activity rate for each of the activity cost pools. Activity Cost Pool Labor-related Activity Rate pe
2. The expected activity for the year was distributed among the companys four products as follows: Expected Activity Activit
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Answer #1

Requirement 1:

Activity Rate

Activity Cost pool Activity Rate
Labor-related $48,000 / 8,000 DLHs = $6 per DLH
Purchase orders $6,900 / 2,300 orders = $3 per order
Material receipts $11,400 / 950 receipts = $12 per receipt
Relay assembly $11,700 / 1,300 relays = $9 per relay
General factory $328,000 / 41,000 MHS = $8 per MHS

Requirement 2:

Amount of overhead cost assigned to each product

Product A $142,880
Product B $69,390
Product C $73,763
Product D $119,967

Working Notes:

Product A

Activity Cost Pool Overhead cost $
Labor-related (2,900 DLHs * $6) 17,400
Purchase orders (150 orders * $3) 450
Material receipts (550 receipts * $12) 6,600
Relay assembly (270 relays * $9) 2,430
General factory (14,500 MHs * $8) 116,000
Total Overhead Cost 142,880

Product B

Activity Cost Pool Overhead cost $
Labor-related (1,000 DLHs * $6) 6,000
Purchase orders (500 orders * $3) 1,500
Material receipts (115 receipts * $12) 1,380
Relay assembly (270 relays * $9) 2,430
General factory (7,260 MHs * $8) 58,080
Total Overhead Cost 69,390

Product C

Activity Cost Pool Overhead cost $
Labor-related (3,200 DLHs * $6) 19,200
Purchase orders (805 orders * $3) 2,415
Material receipts (285 receipts * $12) 3,420
Relay assembly (312 relays * $9) 2,808
General factory (5,740 MHs * $8) 45,920
Total Overhead Cost 73,763

Product D

Activity Cost Pool Overhead cost $
Labor-related (900 DLHs * $6) 5,400
Purchase orders (845 orders * $3) 2,535
Material receipts (0 receipts * $12) 0
Relay assembly (448 relays * $9) 4,032
General factory (13,500 MHs * $8) 108,000
Total Overhead Cost 119,967

All the best...

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