Figure 7-3.Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70% of its components from Bello, because of the lower price. The total annual demand is 75,000 units.
-Refer to Figure 7-3. Calculate the activity rate for reworking products based on rework hours. Round to the nearest whole dollar.
A) $599 per hour
B) $595 per hour
C) $602 per hour
D) $605 per hour
E) $622 per hour

Question

Figure 7-3.Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70% of its components from Bello, because of the lower price. The total annual demand is 75,000 units.  
-Refer to Figure 7-3. Calculate the activity rate for reworking products based on rework hours. Round to the nearest whole dollar.
A) $599 per hour 
B) $595 per hour 
C) $602 per hour 
D) $605 per hour 
E) $622 per hour

Quizplus · Accepted Answer

The formula to calculate activity rate for reworking products based on rework hours is:
Activity rate for reworking products = Total cost of reworking products / Total rework hours
From the given information in the figure, the total cost of reworking products is $35,940 and the total rework hours are 60. Therefore, 
Activity rate for reworking products = 35,940 / 60 = $599 per hour
Therefore, the correct answer is choice A.