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 $363,300 Number of purchase orders Scheduling 231,800 Number of production orders Materials handling 407,300 Number of moves Product development 774,600 Number of engineering changes Production 1,427,500 Machine hours Number of Number of Number of Number of Machine Number Purchase Production Moves Engineering Hours of Orders Orders Changes Units Disk drives 4200 380 1450 13 2400 2200Tape drives 1700 125 610 4 9900 3700Wire drives 12800 720 3800 21 12000 2600 The activity rate for the procurement activity cost pool is:___________. a. $20.42
b. $73.48
c. $60.98
d. $183.67

Answer 1

Answer:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Explanation:

Giving the following information:

Activity Cost Activity Base

Procurement $363,300 Number of purchase orders

It is not clear the number of purchase orders, but, I will assume the following:

Number of Purchase orders:

Disk drives 4200

Tape drives 1700

Wire drives 12800

Total= 18,700

To calculate the predetermined overhead rate, we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Procurement:

Predetermined manufacturing overhead rate= 363,300/18,700

Predetermined manufacturing overhead rate= $19.43