Question

g Hochberg Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total Activity Fabrication 30,000 machine-hours Order processing 375 orders Other Not applicable The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: Wages and salaries $ 423,000 Depreciation 112,000 Occupancy 154,000 Total $ 689,000 The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Fabricating Order Processing Other Total Wages and salaries 10% 70% 20% 100% Depreciation 10% 40% 50% 100% Occupancy 20% 60% 20% 100% The activity rate for the Fabrication activity cost pool is closest to:

Answer 1

Answer: $2.81 per machine hour

Explanation:

Wages and salaries $ 423,000

Activity cost pools 10%

Allocated amount = 10% of $423000

= 0.1 × 423000

= $42,300

Depreciation = $112,000

Activity cost pools 10%

Allocated amount = 10% of 112,000

= 0.1 × 112000

= $11200

Occupancy 154,000

Activity cost pools 20%

Allocated amount = 20% of 154000

= 0.2 × 154000

= $30800

Total allocated amount = $42300 + $11200 + $30800 = $84300

The cost hour is the machine hour which is 30,000

Rate per machine hour = total allocated amount/machine hour

= 84300/30000

= $2.81 per machine hour