Bachrodt 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 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
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
The activity rate for the Processing activity cost pool under activity-based costing is closest to:
A) $2.10 per MH
B) $2.16 per MH
C) $3.60 per MH
D) $1.50 per MH

Question

Bachrodt 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 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
 Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
 The activity rate for the Processing activity cost pool under activity-based costing is closest to:
A) $2.10 per MH 
B) $2.16 per MH 
C) $3.60 per MH 
D) $1.50 per MH

Quizplus · Accepted Answer

To calculate the activity rate for the Processing activity cost pool, we need to divide the total Processing costs by the total machine-hours:

Activity Rate = Processing Costs ÷ Machine-hours

Activity Rate = $109,350 ÷ 50,700 MHs

Activity Rate = $2.16 per MH

Bachrodt Corporation Uses Activity-Based Costing to Compute Product Margins