Panamint Systems Corporation is estimating activity costs associated with produc
ID: 2454068 • Letter: P
Question
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below.
Determine the activity rate for procurement per purchase order. Round to the nearest cent.
Select the correct answer
Activity Cost
Activity Base Procurement $368,374 Number of purchase orders Scheduling $200,314 Number of production orders Materials handling $495,962 Number of moves Product development $774,584 Number of engineering changes Production $1,478,914 Machine hours
Number of
Purchase
Orders Number
of
Production
Orders
Number
of
Moves
Number of Engineering
Changes
Machine
Hours
Number
of
Units Disk drives 3,856 320 1,394 14 2,292 2,126 Tape drives 2,403 178 697 4 9,509 4,067 Wire drives 12,821 766 4,087 23 10,018 2,994
Explanation / Answer
Activity Rate for Procurement per Purchase Order = Procurement Cost/No. of purchase orders =
$ 368,374/(3,856+2,403+12,821)
= 368,374/19,080 = $ 19.30 per Purchase Order - Option 2
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