Question

Vintage Fun reproduces old−fashioned style roller skates and skateboards. The annual production and sales of roller skates is 1,000 ​units, while 1,780 skateboards are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Roller skates require 1.5 direct labor hours per​ unit, while skateboards require 2.25 direct labor hours per unit. The total estimated overhead for the period is $114,900. The company is looking at the possibility of changing to an activity−based costing system for its products. If the company used an activity−based costing​ system, it would have the following three activity cost​ pools:

Expected activity

Activity cost pool

Estimated overhead cost

$6,950 : Setup costs

$16,400 : Engineering costs

$91,550 : Maintenance costs

Roller skates

345 : Setup costs

440 : Engineering costs

2,175 : Maintenance costs

Skateboards

250 : Setup costs

630 : Engineering costs

2,188 : Maintenance costs

Total

595 : Setup costs

1,070 : Engineering costs

4,363 : Maintenance costs

The cost pool activity rate for Engineering Costs would be closest to​ (Round all answers to two decimal​ places.)

A. $7.50 per engineering hour.

B. $11.68 per engineering hour.

C. $20.98 per engineering hour.

D. $15.33 per engineering hour.

Answer 1

Thank you.

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