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Leaper Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost PoolTotal ActivityFabrication35,000machine-hoursOrder processing250ordersOtherNot applicable The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs
Leaper Corporation uses an activity-based costing system with the following three activity cost pools:
Activity Cost PoolTotal ActivityFabrication35,000machine-hoursOrder processing250ordersOtherNot applicable
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
Wages and salaries$380,000Depreciation 150,000Occupancy 170,000Total$700,000
The distribution of resource consumption across activity cost pools is given below:
Activity Cost Pools FabricationOrder ProcessingOtherTotalWages and salaries35%30%35%100%Depreciation15%45%40%100%Occupancy35%30%35%100%
The activity rate for the Order Processing activity cost pool is closest to:
Expert Solution
| Computation of Order Processing Activity Rate: | ||
| Order processing: | ||
| Wages and salaries | 114000 | =380000*30% |
| Depreciation | 67500 | =150000*45% |
| Occupancy | 51000 | =170000*30% |
| Order processing costs | 232500 | |
| Order processing costs (a) | 232500 | |
| Divide by Orders (b) | 250 | |
| Order processing activity rate (a/b) | 930 | |
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