Question

Privott, Inc., manufactures and sells two products: Product Z9 and Product N0. 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 Z9 Product N0 Total
Labor-related DLHs $ 335,018 7,500 4,100 11,600
Product testing tests 51,247 950 1,050 2,000
Order size MHs 476,608 5,100 5,400 10,500
$ 862,873
The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to:_______
a. $28.88 per DLH
b. $48.81 per DLH
c. $53.94 per DLH
d. $431.44 per DLH

Answer 1

Answer:

Predetermined manufacturing overhead rate= $28.88 per direct labor hour

Explanation:

Giving the following information:

Labor-related DLHs $335,018 11,600

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=  335,018/11,600

Predetermined manufacturing overhead rate= $28.88 per direct labor hour

Answer 2

The activity rate for the Labor-Related activity cost pool  is option A. a. $28.88 per DLH

Calculation of the active rate:

We know that

Activity Rate for Labor - Related Activity Cost Pool = Estimated Cost / Expected Activity

= $ 335,018 / 11,600 DLHs

= $ 28.88 per DLH

Hence the option a is correct.

And, the rest of the options are wrong.

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