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# Activity cost pools

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U4A1 Problem 2
You have given this information for ABC Corporation. What is the Activity Rate for the three Activity costs Pools?
Activity Cost Pools total Costs Total Activity Activity Rate
Producing Units \$500,000 1,000 machine hours ? per machine hour

Processing orders \$100,000 1,000 customer orders ? per order

Customer Support \$400,000 100 customers ? per customer

U4 A1 problem 3

Activity Measures Mine Own Firm makes Muscle Cars. Please Complete the table by providing an example of an activity measure for each acitvity.

Activity Level of Activity Example of Activity Measures

President working on Budget for year Organization

Designing a part for the cars Product

Sales calls by Sales people Customer

setting up equipment at plant Batch

direct labor on product unit

Example of Activity Measures

#### Solution Summary

The solution computes the Activity Rate for the three Activity costs Pools and provide an example of an activity measure for each activity.

\$2.19

## Overhead costs to activity cost pools; activity rates

Imai Draperies makes custom draperies for homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity cost pools.

Production overhead . . . . \$240,000
Office expense . . . . . . . . . 160,000
Total . . . . . . . . . . . . . . . . .400,000

Distribution of resource consumption:
Making Job
Activity Cost Pools Drapes Support Other Total
Production overhead 35% 45% 20% 100%
Office expense 15% 55% 30% 100%

The "Other" acticity cost pool consists of the costs of idle capacity and organization-sustaining costs.

The amount of activity for the year is as follows:

Activity Cost Pool Annual Activity
Making drapes . . . . . 4,000 yards
Job support . . . . . . . 100 jobs
Other . . . . . . . . . . . . Not applicable

Required:

a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:

Making Job
Drapes Support Other Total