Hochberg Corporation uses an activity-based costing system with the following th
ID: 2508725 • Letter: H
Question
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
300
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
$340,000
Depreciation
160,000
Occupancy
220,000
Total
$720,000
The distribution of resource consumption across activity cost pools is given below:
Activity Cost Pools
Fabrication
Order Processing
Other
Total
Wages and salaries
25%
60%
10%
100%
Depreciation
20%
50%
35%
100%
Occupancy
15%
55%
30%
100%
The activity rate for the Fabrication activity cost pool is closest to:
$5.30 per machine-hour
$3.60 per machine-hour
$7.20 per machine-hour
$5.00 per machine-hour
Activity Cost Pool
Total Activity
Fabrication
30,000
machine-hours
Order processing
300
orders
Other
Not applicable
Explanation / Answer
Total Cost Alloacted to Fabrication= $ 150,000
Hence, activity rate for the Fabrication activity cost pool = Total Cost / Total Machine Hours
= $ 150,000 / 30,000 Machine Hours
= $ 5.00 per machine hour
Hence the correct answer is : D. $ 5.00 per machine hour
Note :
Allocation ( Percentage * Cost) Activity Cost Pools Cost Fabricating Wages and salaries 25% 3,40,000 85,000 Depreciation 20% 1,60,000 32,000 Occupancy 15% 2,20,000 33,000 1,50,000Related Questions
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