Question

spring company uses activity-based costing to allocate their overhead costs. setup costs of $100,000 are based on number of setups. factory services of $65,000 are based on square footage. spring company has identified 500 setups and has 10,000 square feet in their factory. what is the activity rate for the setup activity cost pool.

Answer 1

The activity rate for the setup activity cost pool is $200.

A cost pool means a grouping of individual prices, typically by department or service center. Price distribution are then made from the cost pool. For example, the cost of the maintenance department is calculated in a value pool and then distrubution to those departments using its services. In activity-based costing (ABC), Activity cost pool can be used to a general method to calculate production value.

Though, a manufacture can not be allocated for indirect values such as marketing and employee salaries.

Hence, the activity rate for the setup activity cost pool = 10,000 / 500

                                                                                           = $200

Learn more about cost pool at: https://brainly.com/question/14347180

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