Sultan Company uses an activity-based costing system At the beginning of the yea

Question

Sultan Company uses an activity-based costing system At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools Activity Cost Pool Labor-related Purchase orders Parts management Board etching General factory Expected Overheacd Cost s 135,600 $ 8,400 $ 68,870 $ 53,700 171,000 Activity Measure Expected Activity 22,600 DLHs Direct labor-hours Number of orders Number of part types Number of boards Machine-hours 240 orders 97 part types 1,790 boards 19,000 MHs Required 1. Compute the activity rate for each of the activity cost pools 2. The expected activity for the year was distributed among the company's four products as follows Expected Activit Product A Product B Product C Product D Activity Cost Pool Labor-related (DLHs) Purchase orders (orders) Parts management (part types) Board etching (boards) General factory (MHs) 3,000 73 23 480 3,600 11,900 34 15 770 6,000 4,000 100 10 3,700 49 540 3,500 5,900

Explanation / Answer

Solution 1:

Solution 2:

Determination of activity rate - Sultan Company Activity Estimated Overhead Cost Activity Base Usage of Activity Base Activity Rate Labor related $135,600.00 Direct labor hours 22600 $6.00 Per DLH Purchase orders $8,400.00 Number of orders 240 $35.00 Per Order Parts management $68,870.00 Nos of parts type 97 $710.00 Per Part Board Etching $53,700.00 Nos of boards 1790 $30.00 Per board General Factory $171,000.00 Machine hours 19000 $9.00 Per machine hour Total $437,570.00

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