Question

Forner, Inc., manufactures and sells two products: Product Z1 and Product Z8. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

Estimated Expected Activity
Activity Cost Pools Activity Measures Overhead Cost Product Z1 Product Z8 Total
Labor-related DLHs $ 112,190 600 2,000 2,600
Machine setups setups 40,440 500 700 1,200
Order size MHs 609,770 3,000 3,200 6,200
$ 762,400
The activity rate for the Machine Setups activity cost pool under activity-based costing is closest to:_______.
a. $203.26 per setup
b. $190.55 per setup
c. $122.97 per setup
d. $33.70 per setup

Answer 1

Machine setups= $33.7 per setup

Step-by-step explanation:

Giving the following information:

Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Z1 Product Z8 Total

Machine setups setups 40,440 500 700 1,200

To calculate the activity rate, we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Machine setups= 40,440 / 1,200

Machine setups= $33.7 per setup