Exercise 3-11 Contrasting Activity-Based Costing and Conventional Product Costing [LO3-2, LO3-3, LO3-4]

[The following information applies to the questions displayed below.]

Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the companys five activity cost pools:

Activity Cost Pool	Activity Measure	Expected Overhead Cost		Expected Activity
Labor-related	Direct labor-hours	$	19,125	2,125	DLHs
Purchase orders	Number of orders	$	1,660	415	orders
Product testing	Number of tests	$	3,000	300	tests
Template etching	Number of templates	$	1,470	70	templates
General factory	Machine-hours	$	59,500	8,500	MHs

Exercise 3-11 Part 1

Required:

1.

Compute the activity rate for each of the activity cost pools.

Activity Cost Pool	Activity Rate
Labor-related	$9	per DLH
Purchase orders	$4	per order
Product testing	$10	per test
Template etching	$21	per template
General factory	$7	per MH

Exercise 3-11 Part 2

2.	The expected activity for the year was distributed among the companys four products as follows:

Activity Cost Pool	Expected Activity
	Product A	Product B	Product C	Product D
Labor-related (DLHs)	450	75	800	800
Purchase orders (orders)	50	65	150	150
Product testing (tests)	180	55	0	65
Template etching (templates)	0	58	10	2
General factory (MHs)	3,500	1,700	2,000	1,300

Using the ABC data, determine the total amount of overhead cost assigned to each product.

	Total Overhead Cost
Product A
Product B
Product C
Product D