Reference no: EM132379839

Assigning Costs to Activities, Resource Drivers

The Receiving Department has three activities: unloading, counting goods, and inspecting. Unloading uses a forklift that is leased for $19,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,600 per year. Other operating costs (maintenance) for the forklift total $2,250 per year. Inspection uses some special testing equipment that has depreciation of $3,500 per year and an operating cost of $1,250.

Receiving has three employees who have an average salary of $30,000 per year. The work distribution matrix for the receiving personnel is as follows:

Activity      Percentage of Time on Each Activity

Unloading          40%

Counting           25%

Inspecting         35%

No other resources are used for these activities.

Required:

1. Calculate the cost of each activity.

Unloading

Counting

Inspecting

2. Explain the two methods used to assign costs to activities.

When the resource is used only by one activity, then is possible. When the activities are shared, as in the case of labor, then must be used.

Activity Rates

Patten Company uses activity-based costing (ABC). Patten manufactures toy cars using two activities: plastic injection molding and decal application. Patten's 20X1 total budgeted overhead costs for these two activities are $442,000 (90% for injection molding and 10% for decal application). Molding overhead costs are driven by the number of pounds of plastic that are molded together. Decal application overhead costs are driven by the number of decals applied to toys. The budgeted activity data for 20X1 are as follows:

Pounds of plastic molded 2,080,000

Number of decals applied 180,000

Required:

1. Calculate the activity rate for the plastic injection molding activity. Round your answer to the nearest cent.

2. Calculate the activity rate for the decal application activity. Round your answer to the nearest cent.

Activity Rates and Activity-Based Product Costing

Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant:

In addition, the following information was provided so that overhead costs could be assigned to each product:

Required:

1. Calculate the overhead rates for each activity. If required, carry your answers out to the nearest cent.

Setups

Machining

Engineering

Packing