Question

Fame Company manufactures engines. Fame produces all the parts necessary for its engines, except for one electronic component, which is purchased from two local suppliers: Hydra International and Parable Company. Both suppliers are reliable and rarely deliver late. Hydra sells the component for $12.00 per unit, while Parable sells the same component for $10.00. Fame purchases 80% of its components from Parable because of the lower price it offers. The total annual demand is 95,000 units. L. Activity Data Inspecting components (sampling only) Reworking products (due to failed component) Warranty work (due to failed component) Activity cost $ 210,000 $2,454,000 $1,923,000 IL Supplier Data Hydra Parable $12.00 $10.00 Unt purchase price Units purchased Sampling hours Rework hours Warranty hours 00 2,600 3.800 7,000 550 Calculate the activity rate for working products based on rework hours. Note: Round answer to the nearest dollar) $521 per hour b. 5605 per hour 5602 per hour d. 5595 per hour Ове о 9

Answer 1

Activity rate for reworking product = Estimated overhead/estimated hour = 2454000/3950 = 621

So answer is a) $621 per hour