Computing abc allocation rates

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Computing ABC allocation rates

Refer to Short Exercise 18-7. The president of Pacific suspects that her allocation of indirect costs could be giving misleading results, so she decides to develop an ABC system. She identifies three activities: documentation preparation, information technology support, and training. She figures that documentation costs are driven by the number of pages, information technology support costs are driven by the number of software applications used, and training costs are driven by the number of direct labor hours worked. Estimates of the costs and quantities of the allocation bases follow:

Activity

Estimated Cost

Allocation Base

Estimated Quantity of Allocation Base

Documentation preparation

$ 102,000

Pages

3,000 pages

Information technology support

156,000

Applications used

780 applications

Training

517,000

Direct labor hours

4,700 hours

Total indirect costs

$ 775,000



Requirement

1. Compute the cost allocation rate for each activity.

Reference no: EM13515433

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