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 $315,600 Number of purchase orders Scheduling $200,900 Number of production orders Materials handling $443,500 Number of moves Product development $717,100 Number of engineering changes Production $1,438,900 Machine hours Number of Purchase Orders Number of Production Orders Number of Moves Number of Engineering Changes Machine Hours Number of Units Disk drives 4,080 360 1,460 15 2,200 1,900 Tape drives 1,700 125 760 5 8,600 4,300 Wire drives 11,500 870 3,700 21 10,600 2,400 Determine the activity rate for materials handling per move.a. $58.82
b. $50.00
c. $20.83
d. $80.65

Answer 1

Please kindly note that none of the

Options given in the question is correct.

The correct answer is calculated and explained below

Answer:

$79.92 per move.

Explanation:

Activity rate can be calculated by dividing Activity cost budgeted for the particular activity pool by the Estimated or Total Activity base for that pool

Activity rate = Budgeted activity cost ÷ Estimated or Total Activity base

In the question above,

Budgeted Activity cost for material handling = $443,500

Estimated or Total Activity base for material handling (Summation of Total moves) = 1,460 + 760 + 3,700 = 5920 moves

Activity rate = $443,500 ÷ 5920

= $79.92 per move.