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.
Instructions:
a) What is the amount of cost assigned to the receiving activity? (3 marks)
b) What is the activity rate for receiving? (2 marks)