Question: Activity Rates
Pratt Company uses activity-based costing (ABC). Pratt manufactures toy cars using two activities: plastic injection molding and decal application. Pratt's 2011 total budgeted overhead costs for these two activities are $450,000 (80 percent for injection molding and 20 percent 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 2010 are as follows:
Pounds of plastic molded 2,000,000
Number of decals applied 250,000
Required: 1. Calculate the activity rate for the plastic injection molding activity.
2. Calculate the activity rate for the decal application activity.