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Budgeted total cost of setups is $1,700 and the budgeted number of setups is 34. What is the activity rate for setups?
A$50 per setup
B$25 per setup
C$15 per setup
D$10 per setup
Answer & Solution
Correct answer: A. $50 per setup
1. An activity rate divides the budgeted cost of the activity by the budgeted quantity of its activity base.
2. Setups cost $1,700 in total and 34 setups are budgeted.
3. $1,700 divided by 34 setups gives $50 per setup.
4. $15 is the rate for moves, $25 for inspections and $10 for cleanups, so each belongs to a different activity.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 4.4 Activity-Based Costing for a Manufacturing Business to Estimate Factory Overhead_
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