Question

A company sells two types of products: standard and deluxe. it prepares the following analysis showing budgeted cost and cost driver activity for each of its three activities. activitybudgeted costactivity cost driverbudgeted activity usage standarddeluxetotal factory services$ 104,400square feet3,0002,8005,800 setup$ 11,500setups300200500 quality control$ 116,250units inspected2,5005,2507,750 compute an activity rate for each activity using activity-based costing.

Answer 1

To compute the activity rate for each activity using activity-based costing, divide the budgeted cost for each activity by its corresponding cost driver usage. The activity rates are $18 per square foot for factory services, $23 per setup for setup activities, and $15 per unit inspected for quality control.

Step-by-step explanation:

To compute the activity rate for each activity using activity-based costing, we need to divide the budgeted cost for each activity by its corresponding cost driver usage. Let's calculate the activity rate for each:

Factory Services:

Activity rate = Budgeted cost / Budgeted activity usage = $104,400 / 5,800 square feet = $18 per square foot

Setup:

Activity rate = Budgeted cost / Budgeted activity usage = $11,500 / 500 setups = $23 per setup

Quality Control:

Activity rate = Budgeted cost / Budgeted activity usage = $116,250 / 7,750 units inspected = $15 per unit inspected