The activity rate for engineering support using activity-based costing is $1400.
An activity-based costing rate is calculated by allocating indirect costs to a cost pool, totaling the costs in that cost pool, and then dividing the total cost pool by the cost driver. Activity rates are the allocation rates used in activity-based costing to assign overhead costs to the product manufactured.
For each activity cost pool, an activity rate is calculated using an appropriate activity driver as an allocation base. ABC is a costing method that identifies an organization's activities and assigns the cost of each activity to all services and products based on their actual consumption. As a result, when compared to traditional costing, this model assigns more indirect costs (overhead) to direct costs.
Activity rate for engineering support will be:
= Budgeted cost / Budgeted activity usage
= 98000 / 70
= 1400
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