Question

A manufacturer uses activity-based costing to assign overhead costs to products. Budgeted cost information for selected activities for next year follows. Activity Expected Cost Cost Driver Expected Usage of Cost Driver Purchasing $ 175,000 Purchase orders 5,000 purchase orders Cleaning factory 34,500 Square feet 5,500 square feet Providing utilities 74,950 Square feet 5,500 square feet Compute activity rates for each of the cost pools. (Round your answers to 2 decimal places.)

Answer 1

Answer:

$35 per purchased order and $19.90 per square foot

Explanation:

The computation of the activity rates is shown below:

For Purchasing, it would be

= $175,000 ÷ 5,000 purchase orders

= $35 per purchased order

For factory, it would be

= ($34,500 + $74,950) ÷ (5,500 square foot)

= $19.90 per square foot

We simply divided the cost by the activity level and the same is applied for purchasing and for the factory