Question

Lorie Metals Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:

   

	Direct Labor-Hours per unit	Annual Production
Rims	0.80	29,000 units
Posts	0.80	73,000 units

Additional information about the company follows:

1. Rims require $20 in direct materials per unit, and Posts require $18.
2. The direct labor wage rate is $16 per hour.
3. Rims are more complex to manufacture than Posts and they require special equipment.
4. The ABC system has the following activity cost pools:

		Estimated Activity
Activity Cost Pool	Activity Measure	Estimated Overhead Cost		Rims	Posts	Total
Machine setups	Number of setups	$	34,310	100	100	200
Special processing	Machine-hours	$	113,150	1,000	0	1,000
General factory	Direct labor-hours	$	1,218,000	4,000	83,000	87,000

Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

Activity Rate per setup Activity Cost Pool Machine setups Special processing General factory per MH per DLH

Answer 1

Activity rate = Total verhead / Number of activity

Machine setup = 34310 / 200 = 171.55

Special processing = 113150 / 1000 = 113.15

General factory = 1218000 / 87000 = 14.00