Question

Testbank Exercise 2 Megan Industries manufactures several products including a basic case for a popular smart phone. The company is considering adopting an activity-based costing approach for setting its budget. The company's production activities, budgeted activity costs, and cost drivers for the coming year are as follows. Activity Cost driver Cost driver quantity Activity overhead $ Machine setup # of setups $196,020 810 of quality tests Inspection 190,850 550 #of purchase orders Materials receiving 201,780 1,770 The budgeted data for smart phone case production are as follows. Direct materials $2.50 per unit $0.60 per unit Direct labor Number of setups 99 Number of quality tests 361 Number of purchase orders 56 Production 19,550 units (a) Calculate the activity rate for each cost pool Machine setup $ per setup Inspection $ per test Materials receiving $ per PO Click if you would like to Show Work for this question: Open Show Work

Answer 1

Solution

Machine setup	$          242.00	Per setup
Inspection	$          347.00	Per test
Material receiving	$          114.00	Per PO

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Machine setup	Number of setup	$      196,020.00	810	$          242.00	Per setup
Inspection	Number of test	$      190,850.00	550	$          347.00	Per test
Material receiving	Number of PO	$      201,780.00	1770	$          114.00	Per PO