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Cost Drivers and Activity Costs

A VCR manufacturer has the following costs budgeted in January.

Raw material and components $2,950,000
Insurance, Plant 600,000
Electricity, machinery 120,000
Electricity, lights 60,000
Engineering design 610,000
Depreciation, plant 700,000
Deoreciation, machinery 1,400,000
Custodial wages, plant 40,000
Equipment maintenance, wages 150,000
Equipment maintenance, parts 30,000
Setup wages 40,000
Inspection of finished goods 30,000
Property taxes 120,000
Natural gas, heating 30,000

Divide these costs into activity cost pools and identify a cost driver for assigning each pool of costs to products. Calculate total cost in each activity cost pool.

Solution Summary

Costs are divided into different activity pools. The total cost of each pool is also calculated.

$2.19