24.

Leaper 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......................... 200 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............... $360,000

Depreciation......................... 140,000
Occupancy...........................  160,000
Total..................................... $660,000

The distribution of resource consumption across activity cost pools is given below:

Activity Cost Pools

Order
Fabrication Processing Other Total
Wages and salaries............... 35% 40% 25% 100%
Depreciation......................... 5% 55% 40% 100%
Occupancy........................... 30% 45% 25% 100%

The activity rate for the Order Processing activity cost pool is closest to:

A) $1,485 per order

B) $1,540 per order

C) $1,465 per order

D) $1,320 per order

Ans:  C LO:  2,3

Solution:

Total Order Processing Cost:

Wages and salaries: 40% × $360,000.................... $144,000
Depreciation: 55% × $140,000.............................. 77,000
Occupancy: 45% × $160,000................................. 72,000
Total....................................................................... $293,000

(a) ÷ (b)
(a) (b)
Activity Cost Pool Total Cost Total Activity Activity Rate
Order Processing $293,000 200 orders $1,465 per order
25. Huelskamp Corporation has provided the following data concerning its overhead costs for the
coming year:

Wages and salaries............... $360,000

Depreciation......................... 120,000
Rent......................................  180,000
Total..................................... $660,000

The company has an activity-based costing system with the following three activity cost
pools and estimated activity for the coming year:

Activity Cost Pool Total Activity

Assembly............................. 60,000 labor-hours
Order processing.................. 400 orders
Other.................................... Not applicable

The Other activity cost pool does not have a measure of activity; it is used to accumulate
costs of idle capacity and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:

Activity Cost Pools

Order
Assembly Processing Other Total
Wages and salaries............... 25% 65% 10% 100%
Depreciation......................... 15% 45% 40% 100%
Rent...................................... 35% 40% 25% 100%

The activity rate for the Assembly activity cost pool is closest to:

A) $2.65 per labor-hour

B) $3.85 per labor-hour

C) $2.85 per labor-hour

D) $2.75 per labor-hour

Ans:  C LO:  2,3
Solution:

Total Assembly Cost:

Wages and salaries: 25% × $360,000.................... $ 90,000
Depreciation: 15% × $120,000.............................. 18,000
Rent: 35% × $180,000........................................... 63,000
Total....................................................................... $171,000

(a) ÷ (b)
(a) (b)
Activity Cost Pool Total Cost Total Activity Activity Rate
Assembly $171,000 60,000 labor-hours $2.85 per labor-hour