Question

A&W Manufacturing uses an activity-based costing system for its cutting department. The activity cost totals $148,000. The number of cuts is the cost driver. The cutting department processed a total of 9,000 batches with an average of 6 cuts per batch and total cuts of 46,250. What is the activity rate for the cutting department?

Answer 1

$3.2 per cut

Step-by-step explanation:

Data provided in the question:

Total activity cost = $148,000

Number of batches processed = 9,000

Average cuts per batch = 6

Total cuts = 46,250

Now,

The activity rate is given as:

Activity Rate for the cutting department =
`\frac{\textup{Activity Cost Pool Total}}{\textup{Total Number of Cuts}}`

or

Activity Rate for the cutting department =
`\frac{\$148,000}{\textup{46,250}}`

or

Activity Rate for the cutting department = $3.2 per cut