Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Determine the activity rate for production per machine hour.
A) $62.50
B) $150.00
C) $75.00
D) $176.47

Question

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below.  Determine the activity rate for production per machine hour.
A) $62.50 
B) $150.00 
C) $75.00 
D) $176.47

Quizplus · Accepted Answer

The activity rate is calculated by dividing the total activity cost for each product by the total number of machine hours required to produce that product.

For disk drives: 
Activity rate for indirect labor = $15,000 / 200 machine hours = $75 per machine hour

For tape drives: 
Activity rate for indirect labor = $18,750 / 125 machine hours = $150 per machine hour

For wire drives: 
Activity rate for indirect labor = $12,500 / 200 machine hours = $62.50 per machine hour

Therefore, the activity rate for production per machine hour is $75.00, which is option C.

Panamint Systems Corporation Is Estimating Activity Costs Associated with Producing