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Given the following information, compute the cost driver rate for assembling costs.  ActivityCostsCost DriverAssembling costs$200,000Machine-hoursSetup costs$75,000Number of setupsInspecting costs$50,000Direct labor-hours   ActivityProduct A UseProduct B UseAssembling costs500 machine-hours300 machine-hoursSetup costs10 setups15 setupsInspecting costs25 direct labor-hours15 direct labor-hoursMultiple choice question.$400 per machine-hour$133 per machine-hour$250 per machine-hour$667 per machine-hour

Question

Given the following information, compute the cost driver rate for assembling costs.  ActivityCostsCost DriverAssembling costs200,000MachinehoursSetupcosts200,000Machine-hoursSetup costs75,000Number of setupsInspecting costs50,000Directlaborhours   ActivityProductAUseProductBUseAssemblingcosts500machinehours300machinehoursSetupcosts10setups15setupsInspectingcosts25directlaborhours15directlaborhoursMultiplechoicequestion.50,000Direct labor-hours   ActivityProduct A UseProduct B UseAssembling costs500 machine-hours300 machine-hoursSetup costs10 setups15 setupsInspecting costs25 direct labor-hours15 direct labor-hoursMultiple choice question.400 per machine-hour133permachinehour133 per machine-hour250 per machine-hour$667 per machine-hour

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Solution

To calculate the cost driver rate for assembling costs, you need to divide the total assembling costs by the total machine-hours used.

From the information given, the total assembling costs are $200,000. The total machine-hours used are 500 machine-hours for Product A and 300 machine-hours for Product B, which adds up to 800 machine-hours.

So, the cost driver rate for assembling costs is 200,000/800machinehours=200,000 / 800 machine-hours = 250 per machine-hour.

Therefore, the correct answer is $250 per machine-hour.

This problem has been solved

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