McCaskey Corporation uses an activity-based costing system with the following th
ID: 2344037 • Letter: M
Question
McCaskey Corporation uses an activity-based costing system with the following three activity cost pools:Activity Cost Pool Total Activity
Fabrication............. 40,000 machine-hours
Order Processing ..... 500 orders
Other.............. Not Applicable
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
Wages and salaries.. $420,000
Depreciation............. 100,000
Occupancy ..... 120,000
Total.............. $640,000
The distribution of resource consumption across activity cost pools is given below:
Activity Cost Pools
Fabrication Order Processing Other
Wages and salaries.. 5% 80% 15%
Depreciation............. 15% 45% 40%
Occupancy ..... 25% 50% 25%
The activity rate for the Fabrication activity cost pool is closest to:
a. $1.65 per machine-hour
b. $4.00 per machine-hour
c. $0.80 per machine-hour
d. $2.40 per machine-hour
Explanation / Answer
b