Activity cost driver rates Creathon Company's plant in Columbus, Ohio, manu¬ factures two products: BR12 and BR15. Product BR15 has a more complex de¬ sign and requires more setup time than BR12.

Setups for BR12 require two hours on average; setups for BR15 require three hours. Creathon's setup department employs 10 workers whose average wage is $10 per hour; fringe benefits cost 38% of the wages. Other costs for setup activi¬ ties amount to $25 per setup. Creathon plans to use all 10 workers for 40 hours each for the first three weeks of the winter quarter. The amount of work for these three weeks is as follows:

REQUIRED

(a) Determine the actual setup activity cost driver rate based on (1) the number of setups and (2) the number of setup hours.

(b) Is either of the two activity cost driver rates or some other rate appropriate in this case? Why?
LO 6

Transcribed Image Text:

WEEK 1 2 3 NUMBER OF SETUPS FOR PRODUCT BR12 85 90 80 NUMBER OF SETUPS FOR PRODUCT BR15 75 70 80