Question

Activity Rates Patten Company uses activity-based costing (ABC). Patten manufactures toy cars using two activities: plastic injection molding and decal application. Patten’s 20X1 total budgeted overhead costs for these two activities are $675,000 (80% for injection molding and 20% for decal application). Molding overhead costs are driven by the number of pounds of plastic that are molded together. Decal application overhead costs are driven by the number of decals applied to toys. The budgeted activity data for 20X1 are as follows: Pounds of plastic molded 3,000,000 Number of decals applied 375,000 Required: 1. Calculate the activity rate for the plastic injection molding activity (round to two decimal places). $ per pound molded 2. Calculate the activity rate for the decal application activity (round to two decimal places). $ per decal applied

Answer 1

Molding overhead $.018 per pound

Decal overehad: $0.36 per application

Step-by-step explanation:

Molding overhead: 675,000 x 80% = $540,000

cost driver: pounds of plastic

expected: 3,000,000 pounds

overhead rate: $ 540,000 / 3,000,000 pounds

overehead rate = $0.18 per pounds

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Decal overhead: 675,000 x 20% = 135,000

cost driver: decals applications

expected 375,000

overehead rate: $135,000 / 375,000 applications

$0.36 per application