Question

Strama, Inc., manufactures and sells two products: Product A6 and Product I5. 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 A6 Product I5 Total
Labor-related DLHs $191,138 8,200 2,800 11,000
Production orders Orders 44,624 900 1,100 2,000
Order size MHs 183,147 5,600 5,700 11,300

The activity rate for the Order Size activity cost pool under activity-based costing is closest to:_______

Answer 1

The activity rate for the Order Size activity cost pool under activity-based costing is $16.21 per machine hour, calculated by dividing the total estimated overhead cost ($183,147) by the total expected machine hours (11,300 MHs).

Step-by-step explanation:

To calculate the activity rate for the Order Size activity cost pool under activity-based costing (ABC), we need to divide the total estimated overhead cost by the total expected activity for that cost pool.

Given data:
Estimated Overhead Cost for Order Size = $183,147
Total Expected Activity (MHs) for Order Size = 11,300 MHs

The activity rate can be calculated as follows:

Activity Rate for Order Size = Estimated Overhead Cost / Total Expected Activity

Activity Rate for Order Size = $183,147 / 11,300 MHs

Activity Rate for Order Size = $16.21 per MH (rounded to two decimal places)

Answer 2

It will be closest to $ 16.21 (rounding to he nearest cent)

Step-by-step explanation:

We will divide the cost pool over the total cost driver determined for the activity.

In this case, machine hours totals for 11,300

and there is a cost pool of 183,147 dollars

`(Activity\: Cost \: Pool)/(Driver)= Activity\:Rate`

`(183,147)/(11,300)= Activity\:Rate`

Activity rate: 16,207699 = $ 16.21