Question: Rustiest Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the
Rustiest Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company's five activity cost pools:
Activity Cost PoolActivity Measure Expected Expected
Overhead Cost Activity
Labor relatedDirect labor hours $30,115 1,585 DLHs
Purchase ordersNumber of orders $2,320 580 orders
Product testingNumber of tests $6,930 330 test
Template etching Number of templates $870 30 templates
General factoryMachine hours $65,100 9,300 MHs
Required:
1. Compute the activity rate for each of the activity cost pools.
Activity Cost Pool
Labor related per DLH?
Purchase orders per order?
Product testing per test?
Template etching per template?
General factory per MH?
2. The expected activity for the year was distributed among the company's four products as follows:
Activity cost poolExpected Activity
Product AProduct BProduct CProduct D
Labor related (DLHs) 625160400400
Purchase orders (orders)30190170 190
Product testing (test)19055085
Template etching (templates) 01710 3
General factory (MHs)3,6001,7001,700 2,300
Using the ABC data, determine the total amount of overhead cost assigned to each product.
Product A?
Product B?
Product C?
Product D?
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