Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below.
Determine the activity rate for production per machine hour.
A) $62.50
B) $150.00
C) $75.00
D) $176.47

Question

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. 
 Determine the activity rate for production per machine hour.
A) $62.50 
B) $150.00 
C) $75.00 
D) $176.47

Quizplus · Accepted Answer

To determine the activity rate for production per machine hour, we need to calculate the total budgeted activity cost for each product and divide it by the total budgeted activity base for that product.

For disk drives:
Activity rate = (Indirect labor cost for disk drives/Total machine hours for disk drives)
Activity rate = ($62,500/5,000 machine hours)
Activity rate = $12.50 per machine hour

For tape drives:
Activity rate = (Indirect labor cost for tape drives/Total machine hours for tape drives)
Activity rate = ($112,500/1,500 machine hours)
Activity rate = $75.00 per machine hour

For wire drives:
Activity rate = (Indirect labor cost for wire drives/Total machine hours for wire drives)
Activity rate = ($105,000/1,400 machine hours)
Activity rate = $75.00 per machine hour

Therefore, the activity rate for production per machine hour is highest for tape drives and wire drives at $75.00 per machine hour. The correct choice is C.

Panamint Systems Corporation Is Estimating Activity Costs Associated with Producing