Adria Company recently implemented an activity-based costing system. At the begi

Question

Adria Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company's five activity cost pools Activity Measure Expected Overhead Cost Expected Activity 8,500 DLHs 2,800 orders 1,000 receipts Activity Cost Pool Labor-related Purchase orders Material receipts Relay assembly General factory Direct labor-hours $42,500 Number of orders$5,600 Number of receipts $10,000 Number of relays Machine-hours $14,400 1,800 relays $ 245,000 35,000 MHs value 10.00 points Required: 1. Compute the activity rate for each of the activity cost pools Activity Cost Pool Labor-related Purchase orders Material receipts Relay assembly General factory Activity Rate per DLH per order per receipt per relay per MH

Explanation / Answer

Activity cost pool Activity rate Labor related(42500/8500) $5 per DLH Purchase orders(5600/2800) $2 per order Material receipts(10000/1000) $10 per receipt Relay assembly(14400/1800) $8 per relay General factory(245000/355000) $7 per MH

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