Question:
1. Compute the activity cost rates for materials handling, assembly, and design based on these data:
Materials
Cloth 26,000
Fasteners 4,000
Purchased parts 40,000
Materials handling
Labor 8,000
Equipment depreciation 5,000
Electrical power 2,000
Maintenance 6,000
Assembly
Machine operations 5,000
Design
Labor 5,000
Electrical power 1,000
Overhead 8,000
Output totaled 40,000 units. Each unit requires three machine hours of effort. Materials handling costs are allocated to the products based on direct materials cost. Design costs are allocated based on units produced. Assembly costs are allocated based on 500 machine operator hours. (Hint: activity cost rate = total activity costs/total allocation base. Examples of an allocation base include total dollars of materials, total machine operator hours, or total units of output).