Question

A company identified the following partial list of activities, costs, and activity drivers expected for the next year: Activity Expected Costs Cost Driver Extrusion costs $ 83,600 Number batches made Handling costs $ 8,800 Number of orders filled Packaging costs $ 40,500 Number of units made Product A Product B Production volume 750,000 units 600,000 units Batches made 200 batches 750 batches Orders filled 75 200 Calculate activity rates for each of the three activities using activity-based costing (ABC).

Answer 1

Answer:

Extrusion= $88 per batch

Handling= $32 per order

Packaging= $0.03 per unit

Explanation:

Giving the following information:

Activity Expected Costs Cost Driver:

Extrusion costs $ 83,600 Number batches made

Handling costs $ 8,800 Number of orders filled

Packaging costs $ 40,500 Number of units made

Product A Product B:

Production volume: 750,000 units - 600,000 units

Batches made: 200 batches - 750 batches

Orders filled: 75 - 200

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

Estimated activity rate= total estimated activity costs for the period/ total amount of allocation base

Extrusion= 83,600/ (200 + 750)= $88 per batch

Handling= 8,800/(75 + 200)= $32 per order

Packaging= 40,500/ (1,350,000)= $0.03 per unit