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McCaskey Corporation
uses an activity-based costing system with the following three activity cost pools:
Activity Cost Pool Total Activity
Fabrication................ 40,000 machine-hours
Order processing....... 500 orders
Other.......................... Not applicable
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs:
Wages and salaries....... $420,000
Depreciation................. 100,000
Occupancy................... 120,000
Total............................. 640,000
The distribution
of resource consumption across activity cost pools is given below: Fabrication Order Processing Other TOTAL
Wages and salaries 5% 80% 15% 100%
Depreciation 1545 40 100
Occupancy 25 50 25 100
The activity rate for the Fabrication activity cost pool is closest to
a) $1.65 per machine-hour
b) $4.00 per machine-hour
c) $0.80 per machine-hour
d) $2.40 per machine-hour
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