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Activity Based Costing - Computer Activity Rates

Blank Corporation is a diversified manufacturer of consumer goods. The company's activity based costing system has the following seven activity cost pools:

Estimated Expected
Activity Cost Pool Overhead Cost Activity

Labor related $52,000 8,000 direct labor-hours
Machine related $15,000 20,000 machine-hours
Machine setups $42,000 1,000 setups
Production orders $18,000 500 orders
Production testing $48,000 2,000 tests
Packaging $75,000 5,000 packages
General factory $108,800 8,000 direct labor-hours

Required:
1. Compute the activity rate for each activity cost pool.
2. Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours.

2. Compute ABC Product Costs

Blank Corporation is a diversified manufacture of industrial goods. The company's activity
Based costing system has the following six activity cost pools and activity rates:

Activity Cost Pool Activity Rates
Labor related $7.00 per direct labor-hour
Machine related $3.00 per machine-hour
Machine setups $40.00 per setup
Production orders $160.00 per order
Shipments $120.00 per shipment
General factory $4.00 per direct labor-hour

Cost and activity data have been supplied for the following products:

J78 B52
Direct materials cost per unit $6.50 $31.00
Direct labor cost per unit $3.75 $ 6.00
Number of units produced per year 4,000 100

Solution Preview

1. Compute Activity Rates

Blank Corporation is a diversified manufacturer of consumer goods. The company's activity based costing system has the following seven activity cost pools:

Estimated Expected
Activity Cost Pool Overhead Cost Activity

Labor related $52,000 8,000 direct labor-hours
Machine related $15,000 20,000 machine-hours
Machine setups $42,000 1,000 setups
Production orders $18,000 500 orders
Production testing $48,000 2,000 tests
Packaging $75,000 5,000 packages
General factory $108,800 8,000 direct ...

Solution Summary

The solution explains the calculations under Activity Based Costing

$2.19