Ormond 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: Machining, $6,800; Order Filling, $10,700; and Other, $4,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
-The activity rate for the Machining activity cost pool under activity-based costing is closest to:
A)$0.32 per MH
B)$1.25 per MH
C)$1.10 per MH
D)$0.34 per MH

Question

Ormond 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: Machining, $6,800; Order Filling, $10,700; and Other, $4,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: 
-The activity rate for the Machining activity cost pool under activity-based costing is closest to:
A)$0.32 per MH 
B)$1.25 per MH 
C)$1.10 per MH 
D)$0.34 per MH

Quizplus · Accepted Answer

Total MHs = 1,300 MHs + 18,700 MHs = 20,000 MHs
Machining: $6,800 F1F1F1S1F1F1F10 20,000 MHs = $0.34 per MH

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