Sprockets require $18 of direct materials per unit. .Sprockets require 1.4 hours

ID: 2436622 • Letter: S

Question

Sprockets require $18 of direct materials per unit. .Sprockets require 1.4 hours of direct labor per unit. The direct labor wage rate is $15 per hour. . Eosertx has already completed its first stage allocation of indirect costs. The Activity Based Costing (ABC) system has the following activity cost pools: Estimated otal Activity for Overhead Activity Cost Pool (Activity Measure year Cost Machine setups (number of machine setups)$ 72,000 Special processing (machine-hours) Order Processing (# of orders) 400 machine setups S 200,0005,000 machine hours S116,000 580 orders show your work: 1. Compute the activity rate for each activity cost pool. (10 pts.) Activity Cost Pool Machine setups Activity Rate Per machine setup Special processing Per machine hour Order processing Per order 2. One of Eogerty's customers, Andarex Corp., placed only one order this year for 600 Sprockets for a price of $45 per unit. The order required 30 machine hours of special processing and three machine setups to complete. Determine how much indirect cost should be allocated to Andarex under its ABC system. (10 pts.) vity Cost Pool Calculation Machine setups Allocated Cost Special processing Order processing Total

Explanation / Answer

A) Activity Rate: 1) Machine Setups= 72000/400 = $180 per machine setup

2) special processing = 200000/5000 = $40 per hour.

3) Ordr processing= 116000/580 = $ 200 per order

B) Calculation of cost allocation: For order of 600 sprockets

Machine Setups

3 machine setups X $180

$540

Special processing

30 machine hrsX $40

$1200

Order processing

1 order X $200

$200

TOTAL

$ 1940