Santana Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin, plant. The...
Question:
Santana Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin, plant. The following costs are budgeted for the first quarter's operations.
- Machine setup, indirect materials $ 4,000
- Inspections 16,000
- Tests 4,000
- Insurance, plant 110,000
- Engineering design 140,000
- Depreciation, machinery 520,000
- Machine setup, indirect labor 20,000
- Property taxes 29,000
- Oil, heating 19,000
- Electricity, plant lighting 21,000
- Engineering prototypes 60,000
- Depreciation, plant 210,000
- Electricity, machinery 36,000
- Machine maintenance wages 19,000
Classify the above costs of Santana Corporation into activity cost pools using the following: engineering, machinery, machine setup, quality control, factory utilities, maintenance. Next, identify a cost driver that may be used to assign each cost pool to each line of snowmobiles.
What Is A Cost Pool:
In the Activity-Based Costing system, companies must form Cost Pools for their various costs. A Cost Pool is essentially a grouping of costs that are usually driven by the same factors and behave similarly based on the cost driver's activity level.
Answer and Explanation: 1
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| Cost | $ | Cost pool |
|---|---|---|
| Machine setup, indirect materials | 4,000 | Machine setup |
| Inspections | 16,000 | Quality control |
| Tests | 4,000 | Quality control |
| Insuran... |
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Activity Cost Pools: Definition & Examples
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Chapter 7 / Lesson 21
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Activity cost pools are groups of costs that are influenced by a common cost driver, determining how much each cost occurs. Identify various activity cost pools through several examples, noting the common cost driver for each.
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