Question 6 (2 points) X Company makes two liquid products that come in 2.5 gallo

Question

Question 6 (2 points) X Company makes two liquid products that come in 2.5 gallon containers. X Company has identified the following activity cost pools and the associated overhead costs Activity Cost Pool Purchasing Processing Packaging Testing Storing Cleaning Total Estimated Overhead Cost $300,000 $1,500,000 $600,000 $220,000 $180,000 $400,000 $3,300,000 The company has also prepared the following table showing expected activity levels Expected Usage Cost Pool Purchasing Processing Packaging Testing Storage Cleaning Cost Driver # of purchase orders # of gallons procesed # of containers filled # of tests Ave. # of gallons on hand # of batches Product A Product B 800 400,000 160,000 240,000 2,100 11,000 350 700 600,000 1,900 7,000 450 abs Compute the activity-based overhead rate for the Purchasing cost pool. Do not enter dollar signs and give your answer to the nearest dollar. For example $2.58 per hour should entered as 3 Save

Explanation / Answer

Activity based overhead rate for Purchasing cost pool = 200

Activity based overhead rate

= Total Estimated overhead for Purchasing / Total Number of Purchase orders

= $300,000 / [800 Orders + 700 Orders]

= $300,000 / 1,500 Orders

= $200 per Purchase Orders

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