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19 October, 16:11

Adria 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 $75,000 7,500 DLHs

Purchase orders Number of orders $14,400 3,600 orders

Material receipts Number of receipts $14,400 900 receipts

Relay assembly Number of relays $31,200 2,600 relays

General factory Machine-hours $440,000 40,000 MHs

Required:

Compute the activity rate for each of the activity cost pools.

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  1. 19 October, 19:53
    0
    Cost allocation per Direct Labor Hours $ 10 per direct labor hour

    Cost allocation per Purchase Order $ 4 per purchase order

    Cost allocation per material receipts activity $ 16 per receipt

    Cost allocation per relay assembly $ 12 per relay assembly

    Cost allocation per machine hours $ 11 per machine hour

    Explanation:

    Computation of activity rate for each activity cost

    Labor Related Costs $ 75,000

    Cost basis : Direct Labor Hours 7,500 hours

    Cost allocation per Direct Labor Hours $ 10 per direct labor hour

    Purchase Orders Activity cost $ 14,400

    Cost basis: No of purchase orders 3.600 purchase orders

    Cost allocation per Purchase Order $ 4 per purchase order

    Cost of material receipts activity $ 14,400

    Cost basis: No of material receipts 900 receipts

    Cost allocation per material receipts activity $ 16 per receipt

    Cost of relay assembly activity $ 31,200

    Cost basis: No of relay assembly 2,600 relays

    Cost allocation per relay assembly $ 12 per relay assembly

    Cost of General factory $ 440,000

    Cost basis: Machine hours 40,000 machine hours

    Cost allocation per machine hours $ 11 per machine hour
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