Question

[The following information applies to the questions displayed below.]

Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:

Activity Cost Pool	Estimated Overhead Cost			Expected Activity
Labor-related	$	22,000		1,000	direct labor-hours
Machine-related	$	10,000		8,000	machine-hours
Machine setups	$	36,000		800	setups
Production orders	$	29,400		600	orders
Product testing	$	27,900		900	tests
Packaging	$	68,400		3,600	packages
General factory	$	56,800		1,000	direct labor-hours

Required:

1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

	Activity Cost Pool Activity Rate Labor-related per DLH Machine-related per MH Machine setups per setup Production orders per order Product testing per test Packaging per package General factory per DLH

Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below:

Activity Cost Pool	Activity Measure	Total Cost		Total Activity
Customer deliveries	Number of deliveries	$	481,600	5,600	deliveries
Manual order processing	Number of manual orders		372,600	4,600	orders
Electronic order processing	Number of electronic orders		217,460	13,100	orders
Line item picking	Number of line items picked		552,000	460,000	line items
Total selling and administrative expenses		$	1,623,660

Med Max gathered the data below for two of the many hospitals that it serves—City General and County General:

	Activity
Activity Measure	City General	County General
Number of deliveries	10	20
Number of manual orders	0	40
Number of electronic orders	10	0
Number of line items picked	110	270

Required:

1. Compute the activity rate for each activity cost pool.

2. Compute the total activity costs that would be assigned to City General and County General.

	Activity Cost Pool Activity Rate Customer deliveries per delivery Manual order processing per manual order Electronic order processing per electronic order Line item picking per line item picked

	ABC Cost Activity Cost Pool City General County General Customer deliveries Manual order processing Electronic order processing Line item picking Total activity costs

Answer 1

Cost assigned = Activity * Activity rate