McCaskey Corporation uses an activity-based costing system with the following th
ID: 2469933 • Letter: M
Question
McCaskey Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total Activity Fabrication 50,000 machine-hours Order processing 625 orders Other N/A 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 $450,000 Depreciation 172,000 Occupancy 189,000 Total $811,000 The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Fabrication Order Processing Other Total Wages and salaries 5% 70% 25% 100% Depreciation 10% 40% 50% 100% Occupancy 20% 60% 20% 100% The activity rate for the Fabrication activity cost pool is closest to: $2.41 per machine-hour $4.06 per machine-hour $1.55 per machine-hour $0.81 per machine-hour
Explanation / Answer
The activity rate for the Fabrication activity cost pool is closest to $2.41 per machine hour shown as under:
Wages and salaries 22500 450000*5% Depreciation 17200 172000*10% Occupancy 37800 189000*20% Total Cost 77500 Total machine hours 30,000 Activity Rate 2.58