Question

Privott, Inc., manufactures and sells two products: Product Z9 and Product N0. 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 Overhead
Measures Cost Product Z9 Product N0 Total
Labor-related DLHs $328,018 6,800 3,400 10,200
Product testing tests 47,747 600 700 1,300
Order size MHs 473,108 4,400 4,700 9,100
$848,873
The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to:______.
a. $28.88 per DLH.
b. $48.81 per DLH.
c. $53.94 per DLH.
d. $431.44 per DLH.

Answer 1

Privott, Inc.

The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to:______.

$32.16

Step-by-step explanation:

a) Data and Calculations:

Estimated Expected Activity

Activity Overhead

Measures Cost Product Z9 Product N0 Total

Labor-related DLHs $328,018 6,800 3,400 10,200

Product testing tests 47,747 600 700 1,300

Order size MHs 473,108 4,400 4,700 9,100

$848,873

The activity rate for the Labor-Related activity cost pool:

= Labor Overhead Cost divided by Total Direct Labor Hours

= $328,018/10,200

= $32.16