Question

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire...

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below.


Activity Cost

Activity Base
Procurement $371,200 Number of purchase orders
Scheduling 234,000 Number of production orders
Materials handling 486,400 Number of moves
Product development 744,600 Number of engineering changes
Production 1,479,200 Machine hours

Number of
Purchase
Orders

Number of
Production
Orders

Number
of
Moves

Number of
Engineering
Changes


Machine
Hours

Number
of
Units
Disk drives 4,020    260       1,440 12         1,500 2,300
Tape drives 2,200    245       700 8         8,600 4,000
Wire drives 11,500    780       3,500 20         10,300 2,800

The activity-based cost for each wire drive unit is

a.$20.95

b.$644.27

c.$255.61

d.$230.89

0 0
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Answer #1

The correct answer is b. $ 644.27

Notes:

Number of Purchase Orders Number of Production orders Number of Moves Number of Engineering Changes Machine Hours
Disk drives 4020 260 1,440 12 1,500
Tape drives 2200 245 700 8 8,600
Wire drives 11500 780 3,500 20 10,300
Total Activity 17720 1285 5640 40 20400
Activity Cost Activity Base Total Activity Activity Rate ( Activity Cost / Total Activity)
Procurement 371200 Number of purchase orders 17720 20.94808126410840
Scheduling 2,34,000 Number of production orders 1285 182.10116731517500
Materials handling 4,86,400 Number of moves 5640 86.24113475177300
Product development 7,44,600 Number of engineering changes 40 18,615.00
Production 14,79,200 Machine hours 20400 72.50980392156860
Wire drives
Activity Rate ( Activity Cost / Total Activity) Activity Cost ( Activity Rate * Activity)
Procurement 20.94808126 11500 240902.9345
Scheduling 182.1011673 780 142038.9105
Materials handling 86.24113475 3500 301843.9716
Product development 18615 20 372300
Production 72.50980392 10300 746850.9804
Total Cost 1803936.797
Units 2800
Per Unit Cost ( Total Cost /Units) 644.2631418
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