Question

In order to compare WoolCorp’s current method with activity-based costing, you interview the production staff and compile the following information, which relates to the costs for raw wool and wool yarn.

Type of Cost	Activity Base	Total Cost
Sorting	Hours of sorting	$25,600
Cleaning	Units of cleaning machine power	38,400
Combing	Hours of combing machine use	1,300

	Raw Wool	Wool Yarn
Hours of sorting required	1,000	4,000
Units of cleaning machine power required	1,800	4,200
Hours of combing machine use required	70	30

In the following table, compute and enter the activity rate for each of the three activities. If required, round your answers to the nearest cent.

Activity	Activity Rate
Sorting		per sorting hour
Cleaning		per unit of cleaning machine power
Combing		per hour of combing machine use

Points:

0 / 3

In the following table, allocate the costs of sorting, cleaning, and combing based on the rates of activity consumed by each product’s process. When required, round your answers to the nearest dollar.

	Raw Wool	Wool Yarn
Sorting cost	$	$
Cleaning cost
Combing cost
Total cost	$	$

Points:

0 / 8

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Answer 1

Answer-

Activity	Activity Rate
Sorting	$5.12 per sorting hour
Cleaning	$6.4 per unit of cleaning machine hour
Combing	$13 per hours of combing machine use

Explanation-

Calculation of activity rate
Activity cost pool	Activity Measure	Estimated overhead cost (a)	Expected activity (b)	Activity rate (c=a/b)
		$		$
Sorting	Hours of sorting	25600	5000	$5.12 per sorting hour
Cleaning	Units if cleaning machine power	38400	6000	$6.4 per unit of cleaning machine hour
Combing	Hours of combing machine use	1300	100	$13 per hours of combing machine use
	Total	65300

Answer-

	Raw Wool	Woo Yarn
Sorting	$5.12 per sorting hour*1000 hours =$5120	$5.12 per sorting hour*4000 hours =$20480
Cleaning	$6.4 per unit of cleaning machine hour*1800 units =$11520	$6.4 per unit of cleaning machine hour*4200 units =$26880
Combing	$13 per hours of combing machine use*70 hours= $910	$13 per hours of combing machine use*30 hours= $390
Total cost	$17550	$47750