Question

Leaper Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Fabrication Order processing Other Total Activity machine- 40,000 hours 200 orders Not applicable The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: Wages and salaries Depreciation Occupancy Total $360,000 140,000 160,000 $660,000 The distribution of resource consumption across activity cost pools is given below: Wages and salaries Depreciation Occupancy Activity Cost Pools Fabrication Order Processing 35% 40% 5% 55% 308 458 Other 25% 40% 258 Total 100% 100% 100% The activity rate for the Order Processing activity cost pool is closest to:

Answer 1

Ans:

Activity rate for order processing activity= Total overheads for order Processing/Total activity or cost driver for order processing

Particulars	{Order Processing
Wages and Salaries{360,000*40%}	144,000
Depreciation{140,000*55%}	77,000
Occupancy{160,000*45%}	72,000
Total	293,000

Cost driver for order Processing= 200 Orders

Activity rate for order Processing activity= 293,000/200

=> $1,465 per order