Question

Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:

Processing$4,940

Supervising$32,000

Other$11,000

Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

	MHs (Processing)	Batches (Supervising)
Product M0	12,350	800
Product M5	650	800
Total	13,000	1,600

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

	Product M0		Product M5
Sales (total)	$	80,400	$	92,900
Direct materials (total)	$	29,100	$	32,000
Direct labor (total)	$	28,400	$	42,300

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

Answer 1

Answer

• Requirement: Supervising activity’s Activity rate
• Calculation:
  >Supervising cost = $ 32,000
  >Supervising activity driver = 1600 batches.
  >Activity rate = $ 32000 / 1600
  = $ 20 per batch
• Answer
  = $ 20 per batch.