Question

Snavely, Inc., manufactures and sells two products: Product E1 and Product A7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

	Expected Production	Direct Labor-Hours Per Unit	Total Direct Labor-Hours
Product E1	1,200	8.0	9,600
Product A7	200	4.0	800
Total direct labor-hours			10,400

The direct labor rate is $27.20 per DLH. The direct materials cost per unit for each product is given below:

	Direct Materials Cost per Unit
Product E1	$200.00
Product A7	$288.00

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 E1	Product A7	Total
Labor-related	DLHs	$	134,500	9,600	800	10,400
Machine setups	setups		63,430	1,300	200	1,500
Order size	MHs		992,100	3,100	3,900	7,000
		$	1,190,030

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

Answer 1

Answer----------$141.73 per machine hour

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Order size	Number of machine hour	$ 992,100	7000	$          141.73	Per machine hour