Gerbig Snacks produces different styles of potato chips (ruffled, flat, thick-cut, gourmet) for different corporate customers. Each style of potato chip requires different preparation time, different cooking and draining times (depending on desired fat content), and different packaging (single serving versus bulk). Therefore, Gerbig has decided to try ABC to better capture the manufacturing overhead costs incurred by each style of chip. Gerbig has identified the following activities related to yearly manufacturing overhead costs and cost drivers associated with producing potato chips:
Activity Manufacturing
Overhead Cost Driver
Preparation . . . . . . . . . . . . . . . . . . . . . . . . . $610,000.................Preparation time
Cooking and draining . . . . . . . . . . . . . . . . . $972,000....Cooking and draining time
Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . $320,000...................Units packaged
Compute the activity cost allocation rates for each activity assuming the following total estimated activity for the year: 10,000 preparation hours, 36,000 cooking and draining hours, and 4 million packages.