Asked by Caylee Pritchett on May 31, 2024
Verified
Chrzan, Inc., manufactures and sells two products: Product E0 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: 
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: 
The activity rate for the General Factory activity cost pool under activity-based costing is closest to:
A) $44.16 per MH
B) $59.78 per MH
C) $87.09 per MH
D) $37.05 per MH
General Factory
A term referring to the overall manufacturing facilities and operations of a company, encompassing all production activities.
Activity Cost Pool
A grouping of individual costs based on the activities that drive those costs, used in activity-based costing.
- Determine the activity rates for specific cost pools.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
B
Explanation :
To determine the activity rate for each activity cost pool, we need to divide the total cost of the activity pool by the total expected activity level for that pool:
- General Factory: $1,109,400 / 18,550 MH = $59.78 per MH
- Machine Setup: $296,400 / 600 setups = $494 per setup
- Other Production: $267,000 / 3,350 orders = $79.70 per order
- Packaging and Shipping: $494,880 / 23,400 pounds = $21.12 per pound
Therefore, the activity rate for the General Factory activity cost pool under activity-based costing is closest to $59.78 per MH.
- General Factory: $1,109,400 / 18,550 MH = $59.78 per MH
- Machine Setup: $296,400 / 600 setups = $494 per setup
- Other Production: $267,000 / 3,350 orders = $79.70 per order
- Packaging and Shipping: $494,880 / 23,400 pounds = $21.12 per pound
Therefore, the activity rate for the General Factory activity cost pool under activity-based costing is closest to $59.78 per MH.
Explanation :
Activity rate = Estimated overhead cost ÷ Total expected activity
= $579,866 ÷ 9,700 MHs = $59.78 per MH
= $579,866 ÷ 9,700 MHs = $59.78 per MH
Learning Objectives
- Determine the activity rates for specific cost pools.