Question

Bennette Corporation has provided the following data concerning its overhead costs for the coming year: Wages and salaries $540,000 Depreciation 220,000 Rent 240,000 Total $1,000,000 The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year: Activity Cost Pool Total Activity Assembly 40,000 labor-hours Order processing 600 orders Other Not applicable The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Assembly Order Processing Other Total Wages and salaries 30% 25% 45% 100% Depreciation 15% 45% 40% 100% Rent 35% 30% 35% 100% The activity rate for the Order Processing activity cost pool is closest to ____.

Answer 1

The activity rate for the Order Processing activity cost pool is closest to

542

Explanation:

Given that ,

Wages and salaries  $540,000

Depreciation             $220,000

Rent                          $240,000

Cost pool for order processing activity

Activity Cost Pools= 30% 25% 45%

= (540,000*30%) +(220,000*25%)+(240,000*45%)

= (162000)+(55000)+(108000)

=325000

Hence ,the Cost pool for order processing activity  =325000

We know that the formula for

Activity rate = Cost pool/Total activity

Activity Cost Pool Total Activity Assembly 40,000 labor-hours Order processing 600 orders

= 325,000/600

= 542

The activity rate for the Order Processing activity cost pool is closest to

542