Compute activity cost allocation rates (Learning Objective 2)

Uncle Bruce produces different styles of potato chips (ruffled, flat, thick-cut, gourmet) for different corporate customers. Each style of potato chip requires different prepara¬ tion time, different cooking and draining times (depending on desired fat content), and different packaging (single serving versus bulk). Therefore, Uncle Bruce has decided to try ABC costing to better capture the manufacturing overhead costs incurred by each style of chip. Uncle Bruce has identified the following activities related to yearly manu¬ facturing overhead costs and cost drivers associated with producing potato chips:

Compute the activity cost allocation rates for each activity assuming the follow¬ ing total estimated activity for the year: 12,000 preparation hours, 30,000 cooking and draining hours, and 6 million packages.

Transcribed Image Text:

Manufacturing Activity Overhead Cost Driver Preparation $600,000 Preparation time Cooking and draining $900,000 Cooking and draining time Packaging $300,000 Units packaged