Merrin Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool

Total Cost

Total Activity

Assembly

$421,200

27,000 machine-hours

Processing orders

$76,800

1,920 orders

Inspections

$138,600

2,100 inspection-hours

The company makes 300 units of product K27 each year, requiring a total of 720 machinehours, 96 orders, and 42 inspection-hours per year.

The activity rate for the processing orders activity cost pool is closest to:

Question

Merrin Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool

Total Cost

Total Activity

Assembly

$421,200

27,000 machine-hours

Processing orders

$76,800

1,920 orders

Inspections

$138,600

2,100 inspection-hours

The company makes 300 units of product K27 each year, requiring a total of 720 machinehours, 96 orders, and 42 inspection-hours per year.

The activity rate for the processing orders activity cost pool is closest to:

BlackTom AI · Accepted Answer

Activity rate = total cost ÷ total activity. For an activity-cost pool in an activity-based costing (ABC) system, the activity rate (also called the cost-driver rate) is computed by dividing the total cost assigned to that pool by the total amount of the cost driver (activity) for the pool.

1) Relevant knowledge points and concepts
- In ABC, costs are pooled by activity and then allocated using an activity rate.
- Activity rate formula: Activity rate = Total cost of activity pool / Total activity (cost-driver) units.
- For the "processing orders" pool the cost-driver is orders (number of orders).

2) Step-by-step reasoning
- Identify the total cost for the processing orders pool: $76,800.
- Identify the total activity for that pool: 1,920 orders.
- Apply the formula to compute the activity rate per order.

3) Calculations (all intermediate steps)
- Activity rate = $76,800 ÷ 1,920 orders
- Simplify: 76,800 ÷ 1,920 = (76,800/1,920)
- Compute: 1,920 × 40 = 76,800, therefore 76,800 ÷ 1,920 = 40
- Result: $40 per order.

4) Why the correct answer is correct
- The computed activity rate of $40 per order precisely reflects how much of the processing orders pool cost is allocated to each order using the standard ABC formula. It matches the division of total cost by total number of orders.

5) Why the other options are incorrect
- $35 per order would imply a total pool cost of 1,920 × $35 = $67,200, which is less than the actual $76,800.
- $45 per order would imply 1,920 × $45 = $86,400, which is more than the actual $76,800.
- $48 per order would imply 1,920 × $48 = $92,160, also more than actual.
None of these match the given pool cost.

6) Conclusion
The activity rate for the processing orders activity cost pool is $40 per order, which matches the provided correct answer: $40 per order.

类似问题

Use the same information as in Question 1. The product’s direct materials cost is $18.40 per unit and its direct labor cost is $13.60 per unit. According to the activity-based costing system, the average cost per unit of product K27 is closest to:

Which is not a step in activity-based costing?

Which is not a task typically associated with ABC systems?

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