Question

Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows: Activity Cost Pools Machining Designing costs Setup costs Total Cost of Pool Cost Driver $171,100 Number of machine hours 45,100 Number of design hours 66,123 Number of batches Estimated Cost Driver 59,000 5,500 465 Required: 1. Compute the activity rate for each activity. 2. Classify each activity as facility, product, batch, or unit level. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the activity rate for each activity. (Round your answers to 2 decimal places.) Activity Activity Rate Machining per Machine Hour Design Costs per Design Hour Setup per Batch Required 2 >

Answer 1

1] activity rate = total cost/cost driver

	total cost	estimated cost driver	activity rate
Machining	$171,100	59,000	$2.9 per machine hour[171,100/59,000]
designing cost	$45,100	5,500	$8.2 per Design hour [$45,100/5,500]
set up cost	$66,123	465	$142.2 per Batch

Machining	Unit level	The machine cost is related directly to production. it will be defined as unit level cost
design cost	Product level	Design is related to a particular product and not the individual units. so it is product level cost
setup cost	Batch level	Setup Cost involves cost associated with setting up machines for production of a specific batch of the product.

2] overhead cost allocated = cost per driver*cost driver used

	total cost	activity rate	A	B	C
Machining	$171,100	$2.9 per machine hour[171,100/59,000]	$58,000[$2.9*20,000]	$87,000[$2.9*30,000]	$26,100[$2.9*9,000]
designing cost	$45,100	$8.2 per Design hour [$45,100/5,500]	$18,040[$8.2*2,200]	$10,660[$8.2*1,300]	$16,400[$8.2*2,000]
set up cost	$66,123	$142.2 per Batch	$5,688[$142.2*40]	$24,174[$142.2*170]	$36,261[$142.2*255]
Total			$81,728	$121,834	$78,761

1. ACTIVITY PROPORTIONS

A

	Estimated driver/ Total driver* total cost
Machining	$58,000[20,000/59,000]*$171,100
Desiging	$8,040(0.4*$45,100)[2,200/5,500]
Set up	$5,688[(40/465)*$66,123]
Total	$71,728

B

	Estimated driver/ Total driver* total cost
Machining	$87,000[30,000/59,000]*$171,100
Desiging	$10,660[1300/5,500]*$45,100
Set up	$24,174[(170/465)*$66,123]
Total	$121,834

C

	Estimated driver/ Total driver* total cost
Machining	$26,100[9,000/59,000]*$171,100
Desiging	$16,400[2,000/5,500]*$45,100
Set up	$36,261[(255/465)*$66,123]
Total	$78,761

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