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 2. (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 Expected Activity $ 221,100 | 11,000 MHs $ 107,100 210 setups $ 85,000 2 products $ 251,000 10,000 DLHs Activity Measure Machining Number of setups Number of products Direct labor-hours Product Y Product Z 7,100 3,900 60 150 8,100 1,900 Required: What is the activity rate for the Machining activity cost pool? (Round your answer to 2 decimal places.) Activity rate per MH

Answer 1

For machining activity cost pool :

Activity rate = Estimated overhead cost / Expected activity = $221,100 / 11,000 MHs = $20.10 per MH