Solution-Determine the cost driver rate for each activity

Determine the cost driver rate for each activity cost pool

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Reference no: EM13538880

The cost accountant of ABC Manufacturing attended a workshop on activity-based costing and was impressed by the results. After consulting with the production personnel, he prepared the following information on cost drivers and the estimated volume for each driver.

Activity	Cost driver	Cost driver volume	Total
Machining		Ace	Best	Champ
Setup	Number of setups	125	75	50	250
Machining	Machine hours	2,500	1,500	2,000	6,000
Assembly
Assembly	Direct labor hours	25,000	15,000	5,000	45,000
Inspection	Number of inspections	50	25	25	100

The cost accountant also determined how much overhead costs were incurred in each of the four activities as follows:

Activity	Overhead costs
Machining
Setup	$150,000
Machining	750,000
Total Machining department overhead	$900,000
Assembly
Assembly	$360,000
Inspection	90,000
Total Assembly department overhead	$450,000
Total overhead costs	$1,350,000

Required:

a. Determine the cost driver rate for each activity cost pool.

b. Use the activity-based costing method to determine the unit cost for each product.

c. Summarize and comment the results.

Reference no: EM13538880

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Determine the cost driver rate for each activity cost pool

Reference no: EM13538880

Reference no: EM13538880

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