Wrap Corporation Is a Job-Order Costing Company That Uses Activity-Based

question 66

Multiple Choice

Wrap Corporation is a job-order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year:
$$\begin{array} { | l | c | c | c | } \hline \text { Activity } & \text { Cost } & \text { Driver } & \text { Amount of driver } \\\hline \text { Setups } & \$ 220,000 & \text { Number of setups } & 8,000 \\\hline \text { Purchasing } & 210,000 & \text { Number of parts } & 30,000 \\\hline \text { Other overhead } & 260,000 & \text { Direct labor hours } & 80,000 \\\hline\end{array}$$
The following information about the jobs was given for August:
$$\begin{array} { | l | r | r | r | r | } \hline & \text { Job 201 } & \text { Job 202 } & \text { Job 203 } & \text { Job 204 } \\\hline \text { Balance 8/1 } & \$ 64,500 & \$ 40,250 & \$ 31,400 & 0 \\\hline \text { Direct materials } & 64,000 & 32,300 & 21,000 & 16,000 \\\hline \text { Direct labor } & 82,000 & 39,600 & 45,000 & 25,000 \\\hline \text { Number of setups } & 30 & 15 & 40 & 190 \\\hline \text { Number of parts } & 200 & 70 & 500 & 400 \\\hline \text { Direct labor hours } & 4,000 & 2,300 & 5,000 & 1,600 \\\hline\end{array}$$
By August 31, Jobs 202 and 203 were completed and sold. The remaining jobs were still in process.
What is the activity rate for purchasing?

• A)$9
• B)$7
• C)$6
• D)$5

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Definitions:

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