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. Activity Cost Activity Base Procurement $308,500 Number of purchase orders Scheduling $244,500 Number of production orders Materials handling $419,700 Number of moves Product development $720,200 Number of engineering changes Production $1,538,300 Machine hours Number of Purchase Orders Number of Production Orders Number of Moves Number of Engineering Changes Machine Hours Number of Units Disk drives 4,080 450 1,320 11 2,400 1,600 Tape drives 2,300 155 520 4 8,200 4,400 Wire drives 11,300 740 4,300 23 10,600 2,500 Determine the activity rate per production order for scheduling. a.$72.56 b.$17.45 c.$229.37 d.$181.78

d.$181.78

Explanation:

The formula used for activity rate is activity cost divided by the activity base cost.

Panamint Systems Corporation

Activity Cost                                            Activity Base

Procurement $308,500                   Number of purchase orders

Scheduling $244,500                      Number of production orders

Materials handling $419,700           Number of moves

Product development $720,200    Number of engineering changes

Production $1,538,300                      Machine hours

                                                         Disk drives       Tape drives    Wire drives

Number of Purchase Orders           4,080                  2,300           11,300

Number of Production Orders           450                    155              740

Number of Moves                               1,320                 520             4300

Number of Engineering Changes       11                        4                23

Machine Hours                                    2,400             8,200          10,600

Number of Units                                  1600               4,400           2,500

As there are three kinds of drives the total activity base cost is obtained by adding the base cost of each drive.

Scheduling per production=  Scheduling Cost/ Number of production orders

                                    =$244,500   / 450+ 155 +740

                                    = $244,500   / 1345= 181.78