Deemer Corporation has an activity-based costing system with three activity cost pools--Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow: Distribution of Resource Consumption Across Activity Cost Pools:
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 for the company's two products follow:Activity:
The activity rate for the Supervising activity cost pool under activity-based costing is closest to:
A) $15.00 per batch
B) $79.00 per batch
C) $15.80 per batch
D) $6.00 per batch

Question

Deemer Corporation has an activity-based costing system with three activity cost pools--Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:  Distribution of Resource Consumption Across Activity Cost Pools:
 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 for the company's two products follow:Activity:
 The activity rate for the Supervising activity cost pool under activity-based costing is closest to:
A) $15.00 per batch 
B) $79.00 per batch 
C) $15.80 per batch 
D) $6.00 per batch

Quizplus · Accepted Answer

To calculate the activity rate for the Supervising cost pool, we first need to allocate the costs from this pool to the products based on the number of batches.

For Product A: 
Supervising cost = 150 batches x $15 per batch = $2,250

For Product B: 
Supervising cost = 200 batches x $15 per batch = $3,000

Total Supervising cost = $5,250

Next, we need to determine the total number of batches across both products: 
Total batches = 150 + 200 = 350

Finally, we can calculate the activity rate as: 
Activity rate = Total Supervising cost / Total number of batches 
Activity rate = $5,250 / 350 = $15.00 per batch

Therefore, the closest option to the calculated activity rate is C) $15.80 per batch.

Deemer Corporation Has an Activity-Based Costing System with Three Activity