Answer the following questions using the information below:
Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:
The accounting records show the Mossman Job consumed the following resources:

-If Gregory Enterprises uses the three activity cost pools to allocate overhead costs, what are the activity-cost driver rates for supervision of direct labor, machine maintenance, and facility rent, respectively?
A)$0.60 per dlh, $0.025 per mh, $0.80 per sq ft
B)$1.25 per dlh, $0.25 per mh, $0.50 per sq ft
C)$0.40 per dlh, $0.05 per mh, $0.20 per sq ft
D)$0.40 per dlh, $0.125 per mh, $2 per sq ft

Question

Answer the following questions using the information below:
Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:
  The accounting records show the Mossman Job consumed the following resources:
 
-If Gregory Enterprises uses the three activity cost pools to allocate overhead costs, what are the activity-cost driver rates for supervision of direct labor, machine maintenance, and facility rent, respectively?
A)$0.60 per dlh, $0.025 per mh, $0.80 per sq ft 
B)$1.25 per dlh, $0.25 per mh, $0.50 per sq ft 
C)$0.40 per dlh, $0.05 per mh, $0.20 per sq ft 
D)$0.40 per dlh, $0.125 per mh, $2 per sq ft

Quizplus · Accepted Answer

To calculate the activity-cost driver rates, we need to divide the estimated overhead cost for each activity pool by the estimated activity level.

Supervision of direct labor: 
Activity level = 26,000 direct labor hours 
Activity-cost driver rate = $10,400 / 26,000 = $0.40 per direct labor hour

Machine maintenance: 
Activity level = 4,200 machine hours 
Activity-cost driver rate = $525 / 4,200 = $0.125 per machine hour

Facility rent: 
Activity level = 10,000 square feet 
Activity-cost driver rate = $20,000 / 10,000 = $2 per square foot

Therefore, the option that represents the correct activity cost driver rates for each activity is option D (0.40 per dlh, 0.125 per mh, 2 per sq ft).

Answer the Following Questions Using the Information Below