Wright Ltd uses an Activity-based Costing (ABC) system to manufacture tractor metal parts. The following budget information relates to Wright Ltd for next year: Activity Activity Cost pool (£) Activity Cost driver Annual number of activity cost drivers Operating machinery 660,000 Machine hours 110,000 Maintaining machinery 80,000 Maintenance hour 1,600 Setting-up machinery 256,000 Machinery set-up 8,000 Purchasing materials 59,850 Purchase order 450 Controlling quality 104,500 Quality inspection 5,500 Total 1,160,350 An order from a customer for 80,000 units of parts caused 14,500 hours of machining, 22 maintenance hours, 20 machinery set-ups, 35 purchase orders, and 12 quality inspections. The order used £50,000 of materials and £65,000 of direct labour. The cost driver rate per activity is? a. Operating machinery Maintaining machinery Setting-up machinery Purchasing materials Controlling quality c) 6 50 18 50 18 b. Operating machinery Maintaining machinery Setting-up machinery Purchasing materials Controlling quality d) 6 50 32 133 19 c. Operating machinery Maintaining machinery Setting-up machinery Purchasing materials Controlling quality a) 8 30 1 13 15 d. Operating machinery Maintaining machinery Setting-up machinery Purchasing materials Controlling quality b) 7 40 11 80 16

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Wright Ltd uses an Activity-based Costing (ABC) system to manufacture tractor metal parts. The following budget

information relates to Wright Ltd for next year:

Activity	Activity Cost pool (£)	Activity Cost driver	Annual number of activity cost drivers
Operating machinery	660,000	Machine hours	110,000
Maintaining machinery	80,000	Maintenance hour	1,600
Setting-up machinery	256,000	Machinery set-up	8,000
Purchasing materials	59,850	Purchase order	450
Controlling quality	104,500	Quality inspection	5,500
Total	1,160,350

An order from a customer for 80,000 units of parts caused 14,500 hours of machining, 22 maintenance hours, 20 machinery set-ups, 35 purchase orders, and 12 quality inspections. The order used £50,000 of materials and £65,000 of direct labour.

The cost driver rate per activity is?