12. North Company has two products: X and Y. The company uses activity-based cos
ID: 2566257 • Letter: 1
Question
12. North Company has two products: X and Y. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools:
Activity Estimated Expected Activity
Cost Pool Overhead Cost Product X Product Y Total
Firing $ 29,200 1,000 500 1,500
Running $ 40,000 200 800 1,000
Setting $180,000 600 5,400 6,000
The annual production and sales level of Product X is 9,094 units. The annual production and sales level of Product Y is 15,826. What is the activity rate under the activity-based costing system for Setting? (rounded to $00.00)
Explanation / Answer
Solution :- Calculation of Activity rate for Setting :-
Activity rate = Estimated overhead amount / Total expected activity.
= 180000 / (600 + 5400)
= 180000 / 6000
= $ 30.00
Conclusion :- Activity rate for Setting = $ 30.00
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