Question

Required information [The following information applies to the questions displayed below.) Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools: Activity Cost Pool Labor-related Machine-related Machine setups Production orders Product testing Packaging General factory Estimated Overhead Cost $ 18,400 $ 5,000 $ 46,809 $ 23,000 $ 27,200 $ 39,600 $ 51,600 Expected Activity 2,000 direct labor-hours 10,000 machine-hours 1,200 setups 500 orders 800 tests 3,600 packages 2,000 direct labor-hours Required: 1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Labor-related Machine-related Machine setups Production orders Product testing Packaging General factory Activity Rate per DLH per MH per setup per order per test per package per DLH

Answer 1

1.

Calculation of activity rates

Activity cost pool	Estimated overhead cost	Expected activity	Activity rate
Labor related	18,400	2,000 direct labor hours	18,400/2,000 = $9.2 per direct labor hour
Machine related	5,000	10,000 machine hours	5,000/10,000 = $0.5 per machine hour
Machine setups	46,800	1,200 setups	46,800/1,200 = $39 per setup
Production orders	23,000	500 orders	23,000/500 = $46 per order
Product testing	27,200	800 tests	27,200/800 = $34 per test
Packaging	39,600	3,600 packages	39,600/3,600 = $11 per package
General factory	51,600	2,000 direct labor hours	51,600/2,000 = $25.8 per direct labor hour
Total overheads	$211,600

2.

Predetermined overhead rate = Total overheads/Direct labor hours

= 211,600/2,000

= $105.8 per direct labor hour

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