| Rusties 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 Pool | Activity Measure | Expected Overhead Cost | Expected Activity | ||
| Labor related | Direct labor hours | $ | 18,000 | 2,000 | DLHs |
| Purchase orders | Number of orders | $ | 1,050 | 525 | orders |
| Product testing | Number of tests | $ | 3,500 | 350 | tests |
| Template etching | Number of templates | $ | 700 | 28 | templates |
| General factory | Machine hours | $ | 50,000 | 10,000 | MHs |
| | |||||
5.
| Required: | |
| 1. | Compute the activity rate for each of the activity cost pools. |
| Activity Cost Pool | Activity Rate | |||
| Labor related | $ | per | DLH | |
| Purchase orders | $ | per | order | |
| Product testing | $ | per | test | |
| Template etching | $ | per | template | |
| General factory | $ | per | MH | |
| | ||||
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6.
| 2. | The expected activity for the year was distributed among the company’s four products as follows: |
| Activity Cost Pool | Expected Activity | |||
| | ||||
| Product A | Product B | Product C | Product D | |
| Labor related (DLHs) | 500 | 100 | 700 | 700 |
| Purchase orders (orders) | 80 | 105 | 180 | 160 |
| Product testing (tests) | 200 | 60 | 0 | 90 |
| Template etching (templates) | 0 | 14 | 10 | 4 |
| General factory (MHs) | 3,400 | 2,200 | 1,800 | 2,600 |
| | ||||
| Using the ABC data, determine the total amount of overhead cost assigned to each product. |
| Total Overhead Cost | ||
| Product A | $ | |
| Product B | $ | |
| Product C | $ | |
| Product D | $ | |
|
| ||
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