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 $ "650,000" 100,000 parts Inspecting product 925,000 1,500 batches Processing purchase orders 130,000 700 orders Paying suppliers 200,000 500 invoices Insuring the factory 325,000 40,000 square feet Designing packaging 100,000 2 models
Required: Compute the activity rate for each activity, assuming the company uses activity-based costing.

Answer 1

Explanation:

The computation of the activity rate for each activity is shown below:  

As we know that

Activity Rate = Expected rate ÷ Activity Driver

For Handling material = $650,000 ÷ 100,000 = $6.50 per part

For Inspecting product = $925,000 ÷ 1,500 parts = $616.67 per batch

For Processing purchase orders = $130,000 ÷ 700 = $185.72 per orders

Paying supplies = $200,000 ÷ 500 = 400 per invoices

Insuring the factory = $325,000 ÷ $40,000 = $8.125 per square foot

Designing packaging = $100,000 ÷ 2 models = 50,000 per models