Compute the activity cost rates for materials handling, assembly, and design bas
ID: 2376663 • Letter: C
Question
Compute the activity cost rates for materials handling, assembly, and design based on these data:
Materials
Cloth $28,000
Fasteners 4,000
Purchased parts 40,000
Materials Handling
Labor $10,000
Equipment depreciation 5,000
Electrical power 2,000
Maintenance 6,000
Assembly
Machinists $ 5,000
Design
Labor $ 5,000
Electrical power 1,000
Overhead 8,000
Output totaled 40,000 units. Each unit requires three machine hours of effort. Materials handling costs are allocated to the products based on direct materials cost. Design costs are allocated based on units produced. Assembly costs are allocated based on 500 machinist hours.
Explanation / Answer
Materials
Materials handling
Assembly
Design
Cloth
28,000
Labor
10,000
Machine operations
5,000
Labor
5,000
Fasteners
4,000
Equipment depreciation
5,000
Electrical power
1,000
Purchased parts
40,000
Electrical power
2,000
Overhead
8,000
Maintenance
6,000
Totals
72,000
23,000
5,000
14,000
We assume allocation basis
Materials
total units of output
40000
Materials handling
direct materials cost(Total of materials)
45,000
Assembly
500 machine operator hours
500
Design
total units of output
40000
Activity cost rate = total activity costs/total allocation base
Activity cost rate
Materials
72000/40000
=
1.8
Materials handling
23000/45000
=
0.5111
Assembly
5000/500
=
10
Materials
Materials handling
Assembly
Design
Cloth
28,000
Labor
10,000
Machine operations
5,000
Labor
5,000
Fasteners
4,000
Equipment depreciation
5,000
Electrical power
1,000
Purchased parts
40,000
Electrical power
2,000
Overhead
8,000
Maintenance
6,000
Totals
72,000
23,000
5,000
14,000
We assume allocation basis
Materials
total units of output
40000
Materials handling
direct materials cost(Total of materials)
45,000
Assembly
500 machine operator hours
500
Design
total units of output
40000
Activity cost rate = total activity costs/total allocation base
Activity cost rate
Materials
72000/40000
=
1.8
Materials handling
23000/45000
=
0.5111
Assembly
5000/500
=
10
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