Question

Umanzor Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Processing, $51,700; Supervising, $34,500; and Other, $22,400. 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 S5	14,800	1,350
Product F5	1,130	350
Total	15,930	1,700

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

$7.68 per MH

$3.55 per MH

$2.93 per MH

$3.25 per MH

Answer 1

ANSWER:

Amount for processing given = $51700

As given in the question: Processing costs are assigned using MHs

Thus, Activity rate for the processing activity pool = Processing costs / total machine hours

= 51700 / 15930

=3.2454

=$3.25 per MH