Scarff,Inc. ,manufactures and sells two products: Product O6 and Product K2.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $23.20 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools,activity measures,and expected activity:
A)$88.19 per setup
B)$123.06 per setup
C)$119.55 per setup
D)$53.69 per setup

Question

Scarff,Inc. ,manufactures and sells two products: Product O6 and Product K2.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below:  The direct labor rate is $23.20 per DLH.The direct materials cost per unit for each product is given below:  The company is considering adopting an activity-based costing system with the following activity cost pools,activity measures,and expected activity: 
A)$88.19 per setup 
B)$123.06 per setup 
C)$119.55 per setup 
D)$53.69 per setup

Quizplus · Accepted Answer

Activity rate = Estimated overhead cost ÷ Total expected activity
= $53,690 ÷ 1,000 setups = $53.69 per setup