Question

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   $384,800                  Number of purchase orders
Scheduling   $227,600                  Number of production orders
Materials handling   $472,700                  Number of moves
Product development   $703,600                  Number of engineering changes
Production   $1,536,300                  Machine hours

   
Number of
Purchase
Orders  
Number of
Production
Orders  
Number
of
Moves  
Number of
Engineering
Changes  

Machine
Hours  
Number
of
Units
Disk drives   3,860         310            1,240         10            1,900         1,700     
Tape drives   1,700         235            740         4            9,900         3,600     
Wire drives   12,200         890            3,500         24            10,100         2,400     
Determine the activity rate for materials handling per move.

a.$70.15
b.$158.61
c.$21.67
d.$86.26

Answer 1

Calculate material handling per move

Activity	expected overhead	expected activity	activity rate
Material handling	472700	1240+740+3500 = 5480	472700/5480 = 86.26 per move

So answer is d) $86.26