Question

Hickory Company manufactures two products—15,000 units of Product Y and 7,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Y and Z. (The total estimated overhead cost may not agree with the sum of allocated overhead costs to each product.) Activity Cost Pool Machining Machine setups Production design General factory Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Estimated Overhead Cost $ 224,400 $ 129,600 $ 88,000 $ 254,000 Expected Activity 11,000 MHs 240 setups 2 products 10,000 DLHs Activity Measure Machining Number of setups Number of products Direct labor-hours Product Y Product Z 7,400 3,600 60 180 1 8,400 1,600 Required: What is the activity rate for the General Factory activity cost pool? (Round your answer to 2 decimal places.) Activity rate per DLH

Answer 1

Activity rate per general factory activity cost pool = General factory estimated overhead costs/ Estimated direct labor hours

= 254,000/10,000

= $25.4 per direct labor hour

Activity Rate

$25.4

per DLH

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