Question

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below.
Activity Cost Activity Base
Procurement $370,000 Number of purchase orders
Scheduling 250,000 Number of production orders
Materials handling 500,000 Number of moves
Product development 730,000 Number of engineering changes
Production 1,500,000 Machine hours


Number of Number of Number of Number of Machine Number of
Purchase Orders Production Orders Moves Engineering Changes Hours Units

Disk drives 4,000 300 1,400 10 2,000 2,000
Tape drives 4,000 150 800 10 8,000 4,000
Wire drives 12,000 800 4,000 25 10,000 2,500

35. Determine the activity rate for procurement per purchase order.
a $43.53
b $18.50
c $15.42
d $37.00

Answer 1

Answer:

b $18.50

Explanation:

We have to divide the Procurement cost pool over the total number of order which is the cost driver of this activity.

Cost pool: 370,000

Disk drives purchase orders:      4,000

Tape drivers purchase orders:    4,000

Wire drivers purchase drives:    12,000  

    Total purchase order             20,000

Now, we know the variables values so we can calculate the rate:

$370,000 cost pool/ 20,000 purchase order = $ 18.5