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21 December, 18:25

g Hochberg Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total Activity Fabrication 30,000 machine-hours Order processing 375 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 $ 423,000 Depreciation 112,000 Occupancy 154,000 Total $ 689,000 The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Fabricating Order Processing Other Total Wages and salaries 10% 70% 20% 100% Depreciation 10% 40% 50% 100% Occupancy 20% 60% 20% 100% The activity rate for the Fabrication activity cost pool is closest to:

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  1. 21 December, 19:06
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    Answer: $2.81 per machine hour

    Explanation:

    Wages and salaries $ 423,000

    Activity cost pools 10%

    Allocated amount = 10% of $423000

    = 0.1 * 423000

    = $42,300

    Depreciation = $112,000

    Activity cost pools 10%

    Allocated amount = 10% of 112,000

    = 0.1 * 112000

    = $11200

    Occupancy 154,000

    Activity cost pools 20%

    Allocated amount = 20% of 154000

    = 0.2 * 154000

    = $30800

    Total allocated amount = $42300 + $11200 + $30800 = $84300

    The cost hour is the machine hour which is 30,000

    Rate per machine hour = total allocated amount/machine hour

    = 84300/30000

    = $2.81 per machine hour
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