Compute the activity rate for each activity cost pool. (Round your answers to 2

Question

Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

Required: 1.

Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools: Estimated Overhead Cost Activity Cost Pool Labor-related Machine-related Machine setups Production orders Product testing Packaging General factory Expected Activity $ 17,600 $ 14,000 31,500 $32,900 $24,000 $90,000 $50,000 5,000 direct labor-hours 8,000 machine-hours 700 setups 700 orders 600 tests 3,600 packages 5,000 direct labor-hours

Explanation / Answer

1)

2)Total overhead = 17600 +14000+31500+32900+24000+90000+50000

                              = $ 260,000

Plant wide overhead rate = Estimatd overhead /estimated direct labor hours

                                            = 260,000 / 5000

                                          = $ 52 per DLH

Activity pool Overhead rate =estimated overhead/expected activity Rate per activity Labor related 17600 / 5000 3.52 per DLH Machine related 14000/8000 1.75 per MH Machine set up 31500 / 700 45 Per set up Production order 32900 /700 47 per order Product testing 24000 / 600 40 per test Packaging 90000 / 3600 25 per packages General factory 50000 / 5000 10 per DLH

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