Question

Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go-karts: Deluxe and Basic. Activity Expected Costs Expected Activity Handling materials $ 625,000 100,000 parts Inspecting product 900,000 1,500 batches Processing purchase orders 105,000 700 orders Paying suppliers 175,000 500 invoices Insuring the factory 300,000 40,000 square feet Designing packaging 75,000 2 models Required: Compute the activity rate for each activity, assuming the company uses activity-based costing. (Round activity rate answers to 2 decimal places.)

Answer 1

Answer:

Handling materials = $6.25 per part

Inspecting product  = $600 per batch

Processing purchase  = $150 per order

Handling materials  = $350 per invoice

Insuring the factory  = $7.50 per square feet

Designing packaging  = $37,500 per model

Explanation:

Activity rate = Estimated Cost ÷ Estimated Activity

therefore,

Handling materials = $ 625,000 ÷ 100,000 parts = $6.25

Inspecting product = $ 900,000 ÷ 1,500 batches = $600

Processing purchase = $ 105,000 ÷ 700 orders = $150

Handling materials = $ 175,000 ÷ 500 invoices = $350

Insuring the factory = $ 300,000 ÷ 40,000 square feet = $7.50

Designing packaging = $ 75,000 ÷ 2 models = $37,500