Question

Hochberg Corporation uses an activity-based costing system with the following threeactivity cost pools:Activity Cost Pool Total ActivityFabrication ............................ 30,000 machine-hoursOrder processing ................... 300 ordersOther ..................................... Not applicableThe Other activity cost pool is used to accumulate costs of idle capacity andorganization-sustaining costs.The company has provided the following data concerning its costs:Wages and salaries ................. $340,000Depreciation ........................... 160,000Occupancy .............................. 220,000Total ........................................ $720,000The distribution of resource consumption across activity cost pools is given below:Activity Cost PoolsFabricationOrderProcessing Other TotalWages and salaries .................. 30% 60% 10% 100%Depreciation ............................ 15% 50% 35% 100%Occupancy ............................... 15% 55% 30% 100%The activity rate for the Fabrication activity cost pool is closest to:__________A) $5.30 per machine-hourB) $3.60 per machine-hourC) $7.20 per machine-hourD) $4.80 per machine-hour

Answer 1

The answer is option A

Step-by-step explanation:

Amount($) Activity cost pools Allocated amount($)

Wages and salaries 340,000 30% 102,000

Depreciation 160,000 15 % 24,000

Occupancy 220,000 15 % 33,000

Total 720,000 159,000

Cost driver (hours) 30,000 machine hours

Rate per machine hr 159,000 ÷ 30,000

=$ 5.30