Question

Wang Company has established the following overhead cost pools and cost drivers for the month of May: Cost Pool Overhead Costs Cost Driver Levels Purchase orders $ 30,000 50 orders Machine setups 50,000 100 setups Electricity 10,000 10,000 kilowatt hours The following information pertains to the actual consumption of activity resources for two sample jobs completed during May. Job M1 Job M2 Number of units produced 500 1,000 Number of purchase orders 15 10 Number of setups 20 10 Number of kilowatt hours 500 1,000 What is the activity-based overhead rate per purchase ord

Answer 1

Purchase order activity rate= $600 per order

Step-by-step explanation:

Giving the following information:

Cost Pool Overhead Costs Cost Driver Levels

Purchase orders $ 30,000 50 orders

To calculate the activity rate for Purchase orders, we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Purchase order activity rate= 30,000 / 50

Purchase order activity rate= $600 per order