1` Unit-level activities : Machining

Batch-level activities : Setups and packing

Product-level activities: Receiving
Facility-level activities: None

2` Activity rates:

(1) Machining $ 80,000.00 / 40000 : $ 2.00 per MHr

(2) Setups $ 32,000.00 / 400 : $ 80.00 per setup
(3) Receiving $ 18,000.00 / 600 : $ 30.00 per receiving order
(4) Packing $ 48,000.00 / 3200 : $ 15.00 per packing order

Overhead assignment:
Infantry
Activity 1 $ 2.00 × 20000 : $ 40,000.00
Activity 2 $ 80.00 x 300 : $ 24,000.00
Activity 3 $ 30.00 x 200 : $ 6,000.00
Activity 4 $ 15.00 x 2400 : $ 36,000.00
Total = $ 106,000.00

Special Forces
Activity 1 $ 2.00 × 20000 : $ 40,000.00
Activity 2 $ 80.00 x 100 : $ 8,000.00
Activity 3 $ 30.00 x 400 : $ 12,000.00
Activity 4 $ 15.00 x 800 : $ 12,000.00
Total = $ 72,000.00

Combining Activities 2 and 4 produces a new pooled rate:

($32,000 +$48,000)/400 = $ 200 per setup

Infantry
Activity 1 $ 2.00 × 20000 : $ 40,000.00
Activity 2 $ 200.00 x 300 : $ 60,000.00
Activity 3 $ 30.00 x 200 : $ 6,000.00
Total = $ 106,000.00

Special Forces
Activity 1 $ 2.00 × 20000 : $ 40,000.00
Activity 2 $ 200.00 x 100 : $ 20,000.00
Activity 3 $ 30.00 x 400 : $ 12,000.00
Total = $ 72,000.00
The assignments are the same and this happens because the consumption ratios of activities
2 and 4 are identical. Thus, rate reduction can occur by combining all activities with identical rates.

3' The two most expensive activities are the first and the combined 2 and 4 activities.
Each has $80,000 of cost. Thus if the cost of activity 3 is allocated in proportion to the cost,
each of the expensive activities would receive 50% of the $18,000 or $9,000. This yields the following pool rates:
Activity 1 (pool 1) : ( $80,000 + $9,000) / 40000 = 2.225 per machine hour
Activity 2 and 4 (pool 2) : ( $80,000 + $9,000) / 400 = 222.5 per setup

Overhead assignment:
Infantry
Pool 1 2.225 x 20000 44500

3960000 330000
12
atios of activities
with identical rates.

4 activities.
tion to the cost,
ollowing pool rates:
per machine hour