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Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire...

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 $344,300 Number of purchase orders
Scheduling $239,200 Number of production orders
Materials handling $436,600 Number of moves
Product development $761,200 Number of engineering changes
Production $1,534,300 Machine hours

Number of
Purchase
Orders		 Number
of
Production
Orders
Number
of
Moves
Number of Engineering
Changes

Machine
Hours
Number
of
Units
Disk drives 4,000 380 1,340 12 1,900 2,000
Tape drives 1,700 225 790 8 8,600 3,600
Wire drives 12,000 700 3,800 20 10,700 2,200

Determine the activity-based cost for each wire drive unit.

A. $251.97

B. $19.45

C. $816.57

D. $305.99

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Homework Answers

Answer #1

The correct answer is option C.$ 816.57

Procurement cost = (($344300÷(4000+1700+12000))×12000= $233424

Scheduling cost ((239200÷(380+225+700))×700=$128307

Material handling cost.= ((436600÷(1340+790+3800))×3800=$279777

Product development cost= ((761200÷(12+8+20))×20= $380600

Production= ((1534300÷(1900+8600+10700))×10700=774387

Total cost=233424+128307+279777+380600+774387=$1796495

Cost per unit = total cost ÷ total units

$1796495÷2200 units =$ 816.58 which is close to option C. The minor differences is due to round off calculation.

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