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7 September, 01:21

Exercise 04-4 Computing overhead rates under ABC LO P3 Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go-karts: Deluxe and Basic. Activity Expected Costs Expected Activity Handling materials $ 625,000 100,000 parts Inspecting product 900,000 1,500 batches Processing purchase orders 105,000 700 orders Paying suppliers 175,000 500 invoices Insuring the factory 300,000 40,000 square feet Designing packaging 75,000 2 models Required: Compute the activity rate for each activity, assuming the company uses activity-based costing. (Round activity rate answers to 2 decimal places.)

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  1. 7 September, 02:09
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    Answer and Explanation:

    The computation of the activity rate for each activity is shown below:-

    a b c = a : b

    Particulars Expected Cost Activity driver Activity rate

    Handling

    material $625,000 100,000 $6.25 per part

    Inspecting

    product $900,000 1,500 $600 per batch

    Processing

    orders $105,000 700 $150 per order

    Paying

    Supplies $175,000 500 $350 per invoice

    Insuring

    factory $300,000 40,000 $7.50 per sqft

    Designing

    packaging $75,000 2 $37,500 per model

    Total $2,180,000

    We simply divide the expected cost by the activity driver in order to find out the activity rate
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