Yogi Inc. is a small company that produces yoga mats and assorted accessories. They have recently transitioned to Activity-Based Costing (ABC) and are in the process of creating a budget. They have compiled the following budgeted Manufacturing Overhead (MOH) costs which are divided into three key activities:
During the year, Yogi used 4,000 setup hours; 12,600 machine hours; and 2,300 inspection hours. If Yogi wants to use an activity rate that is tailored to each activity, then what rate would they use for each?

Question

Yogi Inc. is a small company that produces yoga mats and assorted accessories. They have recently transitioned to Activity-Based Costing (ABC) and are in the process of creating a budget. They have compiled the following budgeted Manufacturing Overhead (MOH) costs which are divided into three key activities:
 During the year, Yogi used 4,000 setup hours; 12,600 machine hours; and 2,300 inspection hours. If Yogi wants to use an activity rate that is tailored to each activity, then what rate would they use for each?

Quizplus · Accepted Answer

This question requires calculation of the budgeted activity rate for each of the key activities while disregarding the actual usage: Setup, $125,000/10,000 setup hours = $12.50 per setup hour; Production, $333,450/20,000 machine hours = $16.67 per machine hour; and Quality Inspection, $106,200/8,000 inspection hours = $13.28 per inspection hour (Choice A).

Yogi Inc Is a Small Company That Produces Yoga Mats and and Assorted