Question

The total factory overhead for norton company is budgeted for the year at $300,000, divided into three activities: assembly, $200,000; setup, $50,000; and materials handling, $150,000. norton manufactures two products: product a and product

b. the activity-based usage quantities for each product by each activity are estimated as follows: assembly setup materials handling product a 2,000 dlh 8,000 dlh 5 setups product b 10,000 dlh 24,000 dlh 15 setups total activity-base usage 12,000 dlh 32,000 dlh 20 setups determine the activity rate for the assembly activity.

a. $15.00

b. $16.67

c. $25.00

d. $1.67

Answer 1

Answer: The activity rate for assembly is $16.67.

We need to calculate the activity rate for assembly activity.

The formula we use is:

$Activity rate = \frac{Total Cost of activity}{No. of direct labor hours for the activity}$

We have:

Total cost of assembly = $200,000.

Total number of direct labour hours for assembly = 12,000 dlh (Product A : 2000 + Product B: 10000)

Substituting the values in the Activity Rate formula, we get,

$Activity Rate = \frac{200,000}{12000}$

Activity Rate = $16.67