Question

Fuller Company has identified 4 different activity pools for its overhead costs, allocated costs to each pool and estimated activity levels as summarized in the following tables: Estimated activity levels for the year Pool 1 Number of setups 600 Pool 2 Inspection hours 2000 Pool 3 Machine hours 28000 Pool 4 Number of parts 1800 Direct labor hours 30800 Direct materials cost 144000 Pool 1 Pool 2 Pool 3 Pool 4 Setups Quality control Fabricating Ordering Total estimated costs in each pool $68400 $70000 $336000 $45000 1. What is the activity rate for pool 1? 2. What is the activity rate for pool 3? 3. Assume Fuller used a single plant-wide rate based on direct labor hours. What would that rate be? (Round the rate to the nearest dollar.)

Alphabet Company has identified 4 different activity pools for its overhead costs. They have completed an allocation of all costs to the pools other than supervisory costs, which are estimated at $68000 for the year. The controller has now determined that the supervisory salaries are allocable to the 4 pools in the following manner:

	Setups	Inspections	Grinding	Receiving	Total
Supervisory Salaries	22%	5%	36%	37%	100%

The controller has also estimated the following activity levels for each pool:

Estimated activity levels for the year
Pool 1	Number of setups	1500
Pool 2	Inspection hours	4500
Pool 3	Machine hours	38000
Pool 4	Number of parts	31500

In the table below, complete the calculation of total costs allocable to each pool (stage 1 allocation). Then compute the activity rate for each pool. Round any answer to the nearest dollar.

	Pool 1	Pool 2	Pool 3	Pool 4
	Setups	Inspections	Grinding	Receiving
Supervisory Salaries	$	$	$	$
All other costs	$79540	$131600	$203520	$100840
Total costs	$	$	$	$
Activity rate:	$	$	$	$

Answer 1

1.What is the activity rate for pool 1 = Overhead Cost/Activity Level

= 68,400/600

= $114 per Set up

2.What is the activity rate for pool 3

= 336,000/28,000

= $12 per Machine Hour

3.Single Rate = Total Overheads/Total Direct labor Hours

= 519,400/30,800

= $16.86 per hour i.e. $17 per labor hour

	Pool 1	Pool 2	Pool 3	Pool 4
	Setups	Inspections	Grinding	Receiving
Supervisory Salaries	$14,960	$3,400	$24,480	$25,160
All other costs	$79540	$131600	$203520	$100840
Total costs	$94,500	$135,000	$228,000	$126,000
Activity rate:	$63	$30	$6	$4

Note: Supervisory Salaries have been allocated in the ratio given.

Activity rate has been calculated by dividing total cost by the total quantity of driver