Acc206 Principles of Accounting: Formosa Steel Product makes steel building materials

Acc206 Principles of Accounting

Week 4 Quiz
Formosa Steel Products makes steel building materials for export, and uses an activity-based costing system to account for the indirect manufacturing costs of its various products. Indirect costs for the whole factory are broken down into three activities—casting, materials handling, and milling. The cost driver for casting is machine hours; the cost driver for material handling is kilograms, and the cost driver for milling is direct labor hours. Activity costs and volumes for the year were estimated as follows:
Activity Cost Volume
Casting $2,000,000 800,000.00 Machine hours
Material Handling $400,000 500,000.00 Kilograms
Milling $1,120,000 140,000.00 Direct labor hours

One product is steel reinforcement rods, sold by the metric ton. Engineering reports show that one metric ton of steel reinforcement rods requires $100 of direct materials cost plus $50 of direct labor cost. Producing one metric ton of steel rods also requires 24 machine hours for casting, weighs 1,000 kilograms, and requires 15 direct labor hours.

What is the activity rate for the milling activity?
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