Question - Cummings Company has identified the following overhead activities costs and activity drivers for the coming year:
|
Activity
|
Expected cost
|
Activity Driver
|
Activity Capacity
|
|
Setting up
|
$120,000
|
Number of setups
|
600
|
|
Inspecting
|
$ 90,000
|
Inspection hours
|
9,000
|
|
Grinding
|
$180,000
|
Machine hours
|
36,000
|
|
Receiving
|
?
|
Number of parts
|
100,000
|
The company produces several different subassemblies used by other manufacturers. Information on separate batches for two of these subassemblies follows:
|
|
F
|
G
|
|
Direct Materials
|
$ 1,700
|
$1,900
|
|
Direct Labour
|
$ 1,200
|
$ 1,200
|
|
Units Completed
|
200
|
100
|
|
Number of setups
|
2
|
2
|
|
Inspection hours
|
8
|
4
|
|
Machine hours
|
40
|
60
|
|
Parts used
|
40
|
80
|
The company's normal activity is 20,000 direct labour hours. Each batch uses 100 hours of direct labour. Upon investigation, you discover that Receiving employs a worker, who spends 75% of her time on the receiving activity and 25% of her time on inspecting products. Her salary is $80,000. Receiving also uses a forklift, at a cost of $12,000 per year for amortization and fuel. The forklift is used only in receiving.
How would you...
a) Find out the amount of cost assigned to the receiving activity?
b) Find the activity rate for receiving?