Question

Hochberg Corporation uses an activity-based costing system with the following threeactivity cost pools:Activity Cost Pool Total ActivityFabrication ............................ 30,000 machine-hoursOrder processing ................... 300 ordersOther ..................................... Not applicableThe Other activity cost pool is used to accumulate costs of idle capacity andorganization-sustaining costs.The company has provided the following data concerning its costs:Wages and salaries ................. $340,000Depreciation ........................... 160,000Occupancy .............................. 220,000Total ........................................ $720,000The distribution of resource consumption across activity cost pools is given below:Activity Cost PoolsFabricationOrderProcessing Other TotalWages and salaries .................. 30% 60% 10% 100%Depreciation ............................ 15% 50% 35% 100%Occupancy ............................... 15% 55% 30% 100%The activity rate for the Fabrication activity cost pool is closest to:__________A) $5.30 per machine-hourB) $3.60 per machine-hourC) $7.20 per machine-hourD) $4.80 per machine-hour

Answer 1

Answer:

The answer is option A

Explanation:

                                     Amount($)       Activity cost pools    Allocated amount($)

Wages and salaries    340,000                   30%                     102,000

Depreciation                160,000                   15 %                     24,000

Occupancy                  220,000                   15 %                     33,000

Total                             720,000                                              159,000

Cost driver (hours)                                                              30,000 machine hours

Rate per machine hr                                                          159,000 ÷ 30,000

                                                                                                =$ 5.30