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Chapter 3

1.Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:

Activity Cost Pool Estimated
Overhead Cost
Expected Activity
Labor-related $ 51,000 8,000 direct labor-hours
Machine-related $ 14,900 20,525 machine-hours
Machine setups $ 44,000 500 setups
Production orders $ 18,000 400 orders
Product testing $ 50,000 1,700 tests
Packaging $ 67,125 5,200 packages
General factory $101,125 8,000 direct labor-hours

Required:
1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

General factory $ per DLH

2.

2. Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours. (Round your answer to 2 decimal places.)

Predetermined overhead rate $ per DLH

3.

Sultan Company uses an activity-based costing system.
At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:

Activity Cost Pool
Activity Measure Estimated
Overhead Cost Expected
Activity
Labor-related Direct labor-hours $ 280,000 40,000 DLHs
Purchase orders Number of orders $ 90,000 1,500 orders
Parts management Number of part types $ 120,000 400 part types
Board etching Number of boards $ 360,000 2,000 boards
General factory Machine-hours $ 400,000 80,000 MHs

Required:
1. Compute the activity rate for each of the activity cost pools.

General factory $ per MH

2. The expected activity for the year was distributed among the company’s four products as follows:

Expected Activity

Activity Cost Pool Product A Product B Product C Product D
Labor-related (DLHs) 5,800 7,900 3,700 5,400
Purchase orders (orders) 55 30 20 87
Parts management (part types) 35 28 36 19
Board etching (boards) 410 907 412 0
General factory (MHs) 2,600 8,100 4,800 5,500

Using the ABC data, determine the total amount of overhead cost assigned to each product. (Leave no cells blank - be certain to enter "0" wherever required.)

Labor-related (DLHs) $

General factory (MHs)

Total $

Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:

Activity Cost Pool

Activity Measure Expected
Overhead
Cost

Expected Activity
Labor-related Direct labor-hours $ 272,000 30,000 DLHs
Purchase orders Number of orders $ 63,000 750 orders
Product testing Number of tests $ 182,000 1,200 tests
Template etching Number of templates $ 320,000 8,000 templates
General factory Machine-hours $ 837,000 60,000 MHs