Question

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: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product E0 420 10.2 4,284 Product N0 1,600 9.2 14,720 Total direct labor-hours 19,004 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 E0 Product N0 Total Labor-related DLHs $ 302,390 4,284 14,720 19,004 Production orders orders 61,587 900 1,000 1,900 Order size MHs 585,866 5,600 5,300 10,900 $ 949,843 The activity rate for the Order Size activity cost pool under activity-based costing is closest to:

Answer 1

Answer:

Predetermined manufacturing overhead rate= $53,75 per machine hour

Explanation:

Giving the following information:

Order size:

Estimated activity cost= $585,866

Estimated machine hours= 10,900

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= 585,866/10,900

Predetermined manufacturing overhead rate= $53,75 per machine hour