Question

Strama, Inc., manufactures and sells two products: Product A6 and Product I5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product A6	Product I5	Total
Labor-related	DLHs	$	189,138	8,000	2,600	10,600
Production orders	orders		43,624	800	1,000	1,800
Order size	MHs		181,147	5,400	5,500	10,900
		$	413,909

The activity rate for the Order Size activity cost pool under activity-based costing is closest to:

rev: 03_25_2018_QC_CS-119201

Multiple Choice

• $21.35 per MH

• $72.75 per MH

• $39.05 per MH

• $16.62 per MH

Merone Company allocates materials handling cost to the company's two products using the below data:

	Modular Homes	Prefab Barns
Total expected units produced	5,200	8,200
Total expected material moves	520	120
Expected direct labor-hours per unit	720	220

The total materials handling cost for the year is expected to be $221,920.

If the materials handling cost is allocated on the basis of direct labor-hours, the total materials handling cost allocated to the prefab barns is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• 121,047.27

• $56,295.88

• $123,475.00

• $72,160.00

Forner, Inc., manufactures and sells two products: Product Z1 and Product Z8. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

		Estimated		Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost		Product Z1	Product Z8	Total
Labor-related	DLHs	$	127,800	4,800	2,400	7,200
Machine setups	setups		60,270	1,300	200	1,500
Order size	MHs		942,670	3,900	3,500	7,400
		$	1,130,740

The activity rate for the Order Size activity cost pool under activity-based costing is closest to:

rev: 03_25_2018_QC_CS-119201

Multiple Choice

• $60.25 per MH

• $185.32 per MH

• $135.53 per MH

• $127.39 per MH

Answer 1

1) Activity rate for the order size activity cost pool

Order size = Estimated overhead/estimated machine hour = 181147/10900 = 16.62

So answer is d) $16.62 per MH

2) Estimated labor hour = 5200*720+8200*220 = 5548000

Material handling cost allocated to Pref Barns = 221920/5548000*1804000 = 72160

So answer is d) $72160

3) Activity rate for the order size activity cost pool

Order size = Estimated overhead/estimated machine hour = 942670/7400 = 127.39 per MH

So answer is d) $127.39 per MH