Figure 4-22 The Wellness Clinic is considering a time-driven activity based costing system. Given the following data:
Refer to Figure 4-22. What is the capacity cost rate?
A) $4
B) $25
C) $35
D) $105

Question

Figure 4-22 The Wellness Clinic is considering a time-driven activity based costing system. Given the following data:
 Refer to Figure 4-22. What is the capacity cost rate?
A) $4 
B) $25 
C) $35 
D) $105

Quizplus · Accepted Answer

The capacity cost rate is calculated by dividing the total annual indirect costs by the total annual capacity. In this case, the total annual indirect costs are $700,000 and the total annual capacity is 20,000 hours. Therefore, the capacity cost rate is $35 ($700,000 ÷ 20,000 hours).

Figure 4-22 the Wellness Clinic Is Considering a Time-Driven Activity