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

Answer:

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

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

$\frac{Activity\: Cost \: Pool}{Driver}= Activity\:Rate$

$\frac{183,147}{11,300}= Activity\:Rate$

Activity rate: 16,207699 = $ 16.21