Problem: Galavic Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin plant. The following costs are budgeted for the first quarter's operations.
Machine setup, indirect materials $ 4,000
Inspections 16,000
Tests 4,000
Insurance, plant 110,000
Engineering design 140,000
Depreciation, machinery 520,000
Machine setup, indirect labor 20,000
Property taxes 29,000
Oil, heating 19,000
Electricity, plant lighting 21,000
Engineering prototypes 60,000
Depreciation, plant 210,000
Electricity, machinery 36,000
Custodial (machine maintenance) wages 19,000
Instructions:
Classify the above costs of Galavic Corporation into activity cost pools using the following: engineering, machinery, machine setup, quality control, factory utilities, maintenance. Next, identify a cost driver that may be used to assign each cost pool to each line of snowmobiles.