Question

[The following information applies to the questions displayed below.] Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools: Activity Cost Pool Estimated Overhead Cost Expected Activity Labor-related $ 23,200 8,000 direct labor-hours Machine-related $ 5,000 10,000 machine-hours Machine setups $ 36,000 1,200 setups Production orders $ 27,000 600 orders Product testing $ 23,400 900 tests Packaging $ 37,000 3,700 packages General factory $ 54,800 8,000 direct labor-hours Required: 1. Compute the activity rate for each activity cost pool. (

Answer 1

Rustafson Corporation

Activity rates:

Activity Cost Pool Activity Rates

Labor-related $2.90 per direct labor-hour

Machine-related $0.50 per machine-hour

Machine setups $30 per setup

Production orders $45 per order

Product testing $26 per test

Packaging $10 per package

General factory $6.85 per direct labor-hour

Step-by-step explanation:

a) Data and Calculations:

Activity Cost Pool Estimated Overhead Cost Expected Activity

Labor-related $ 23,200 8,000 direct labor-hours

Machine-related $ 5,000 10,000 machine-hours

Machine setups $ 36,000 1,200 setups

Production orders $ 27,000 600 orders

Product testing $ 23,400 900 tests

Packaging $ 37,000 3,700 packages

General factory $ 54,800 8,000 direct labor-hours

Activity rates:

Activity Cost Pool Estimated Overhead Cost Activity Rates

Labor-related $ 23,200/8,000 $2.90/direct labor-hour

Machine-related $ 5,000/10,000 $0.50/machine-hour

Machine setups $ 36,000/ 1,200 $30/setup

Production orders $ 27,000/600 $45/order

Product testing $ 23,400/900 $26/test

Packaging $ 37,000/3,700 $10/package

General factory $ 54,800/8,000 $6.85/direct labor-hour