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 340 9.4 3,196 Product N0 1,200 8.4 10,080 Total direct labor-hours 13,276 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 $ 298,390 3,196 10,080 13,276 Production orders orders 57,587 500 600 1,100 Order size MHs 581,866 5,200 4,900 10,100 $ 937,843 The activity rate for the Order Size activity cost pool under activity-based costing is closest to:

Answer 1

Answer:

Order size= $57.61 per machine hour

Explanation:

Giving the following information:

Order size:

Estimated total overhead= $581,866

Estimated total machine hours= 10,100

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

Order size= 581,866 / 10,100

Order size= $57.61 per machine hour