Question

Porche, Inc., manufactures and sells two products: Product D4 and Product N0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours
Product D4 100 5.0 500
Product N0 700 2.0 1,400
Total direct labor-hours 1,900
The company is considering adopting 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 D4 Product N0 Total
Labor-related DLHs $ 32,414 500 1,400 1,900
Machine setups setups 13,445 300 200 500
Order size MHs 415,905 4,200 4,300 8,500
$ 461,764
The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to:___________
a. $17.06 per DLH
b. $44.82 per DLH
c. $67.23 per DLH
d. $923.53 per DLH

Answer 1

Predetermined manufacturing overhead rate= $17.06 per direct labor hour

Step-by-step explanation:

Giving the following information:

Activity Cost Pools Activity Total

Labor-related DLHs $32,414 1,900

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

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

Predetermined manufacturing overhead rate= 32,414/1,900

Predetermined manufacturing overhead rate= $17.06 per direct labor hour