Wedd 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, $27,200; Supervising, $9,300; and Other, $9,500. 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: The activity rate for the Processing activity cost pool under activity-based costing is closest to:
A) $2.30 per MH
B) $1.35 per MH
C) $1.36 per MH
D) $0.40 per MH

Question

Wedd 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, $27,200; Supervising, $9,300; and Other, $9,500. 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:  The activity rate for the Processing activity cost pool under activity-based costing is closest to:
A) $2.30 per MH 
B) $1.35 per MH 
C) $1.36 per MH 
D) $0.40 per MH

Quizplus · Accepted Answer

Activity rate for Processing activity cost pool = Processing costs / Total machine-hours = $27,200 / 20,000 MHs = $1.36 per MH.

Wedd Corporation Uses Activity-Based Costing to Assign Overhead Costs to Products