Question Holp E Question Holp Sawyer has just hired Nicole Merrell, a recent uni

Question

Question Holp E Question Holp Sawyer has just hired Nicole Merrell, a recent university graduate in accounting Merell asks Sawyer develops software for intermet applications The market is very competitive, and Sawyers competitors contine to etroduce new products at low pricess Sawyer vaniety of software-from simple programs that enable new users to create personal weto gesto con le commercial searcher res Lke most software compan s sa yer's raw material cosis are insignácant oflers a wide Software Department Manager Jeff Gire to join her in a pilot activity based costing study Merrel and Gire idenbily the following activities, related costs, and cost allocation barses Clickthe con to view the information Requitements Requirement 1.Compute the cost allocation rate for each activity Determine the formula and then compute the cost allocation rate for each activity (Round your answers to the nearest cent.) Actrvity O intormation Estimated Estimaterd Indirect Allocation Quantity of Activity Activity Costs Base Allocation Base Applications development 1,20 000 New applications 3 new appications 2090,000 Lines of code19 ebon ines Content production Testng Total indirect costs 290 000 Testing hous 2,000 fersting hours 70O 000 Sawyer is planning to develop the folowing new applicabens . X Page-software for developing personal webpages XSecurecommercial security and firewall sohware X-Page requres 480 000 lines of code and 110 hours of testing while X-Secure nequires 72 mailion lines of code and 550 hours of testing Sawyer expects to produce and sel 55,000 unts of X-Page and 9 units of X-Secure Check Arnswer

Explanation / Answer

Application Development: Estimated Indirect Cost       / New application   = Activity rate for Application development 1320000    / 3         = 440000 per Application Content Production; Estmated Indirect Cost          / Number of lines of code= Activity rate 2090000           / 19000,000        = 0.11 per line of code Testing Estimated Indirect cost / Testing Hours       = Activity rate 290,000               / 2,000 hours         = 145 per testing hour

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