HiTech Products manufactures three types of remote-control devices: Economy, Sta

Question

HiTech Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which uses activity-based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below.

The following information pertains to the three product lines for next year:
  

1.) What is HiTech's pool rate for the material-handling activity closest to?

$2.69 per part.

$10.77 per part.

$1.19 per part.

$5.39 per labor hour.

A rate other than those listed above.

2.) What is HiTech's pool rate for the automated machinery activity closest to?

A rate other than those listed above.

$56.00 per machine hour.

$50.42 per unit.

$23.69 per labor hour.

$23.19 per machine hour.

3.) What is HiTech's pool rate for the finishing activity closest to?

A rate other than those listed above.

$7.63 per unit.

$5.13 per machine hour.

$5.13 per labor hour.

$5.13 per unit.

Activity Cost Cost Driver   Material handling $269,000      Number of parts   Material insertion 3,390,000      Number of parts   Automated machinery 872,000      Machine hours   Finishing 256,000      Direct labor hours   Packaging 256,000      Orders shipped             Total $5,043,000              

Explanation / Answer

Activity Cost Cost Driver(See W.N) Cost per Cost Driver

Material Handling 2,69,000            Number of Parts = 2,25,250                        = 1.19 per Part

Material Insertion 33,90,000          Number of Parts = 2,25,250                       = 15.05 per Part

Automated machinery    8,72,000 Machine Hours =   37,600                           = 23.19 per Machine Hour

Finishing 2,56,000 Direct Labor Hours = 49,950                       = 5.125 per Direct Labor Hr

Packaging 2,56,000 Orders Shipped = 2630                               = 97.34 per Order Shipped

W.N

Number of Parts = 10000*10+4100*15+2550*25 = 2,25,250

Machine Hours = 10000*1 + 4100*3 + 2550*6 = 37,600

Direct Labor Hours = 10000*3 + 4100*3 + 2550*3 = 49,950

Orders Shipped = 1720+ 710 + 200 = 2630

1.) Pool Rate for Material Handling Activity = 1.19 per Part

2.) Pool Rate for Automated Machinery Activity = 23.19 per Machine Hour

3.) Pool Rate for Finishing Activity= 5.125 (Closes to 5.13 per Direct Labor Hour)

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