Final answer:
Pare, Inc. would determine its activity rate by dividing the total product design costs ($75,000) by the number of product lines, which is five. The calculation is $75,000 divided by 5.
Step-by-step explanation:
To determine Pare, Inc.'s activity rate for its product design costs, one must divide the total product design costs by the number of product lines. Product design costs are $75,000 and there are five product lines. Thus, the activity rate is calculated as $75,000 ÷ 5 product lines. This calculation helps the company allocate the product design costs to each product line accurately.To determine the activity rate for allocating product design costs, Pare, Inc. needs to calculate the total activity level, often measured in terms of a relevant cost driver. The activity rate is derived by dividing the total costs by the total quantity of the chosen cost driver. In this case, the relevant cost driver needs to reflect the level of activity that drives the incurrence of product design costs.The given information includes product design costs of $75,000, indirect materials of $27,000, and depreciation of $8,500.
However, it doesn't specify the relevant activity level for allocating these costs. Without knowing the specific cost driver (e.g., number of design hours, number of products designed, etc.), it's challenging to determine the exact activity rate.Assuming that the most appropriate cost driver is the number of product lines (given there are five product lines), the correct calculation for the activity rate would be:\[ \text{Activity Rate} = \frac{\text{Total Product Design Costs}}{\text{Number of Product Lines}} \]Therefore, the correct option would be:3) \( \frac{5}{75,000} \)This formula reflects the allocation of product design costs based on the number of product lines. However, it's essential to note that the choice of the cost driver may vary based on the specific circumstances and the nature of Pare, Inc.'s operations.