Hewett,Inc. ,manufactures and sells two products: Product E7 and Product U7.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 $29.50 per DLH.The direct materials cost per unit is $164.10 for Product E7 and $289.50 for Product U7. The company is considering adopting an activity-based costing system with the following activity cost pools,activity measures,and expected activity: The activity rate for the Production Orders activity cost pool under activity-based costing is closest to:
A)$77.03 per order
B)$83.46 per order
C)$82.48 per order
D)$73.95 per order

Question

Hewett,Inc. ,manufactures and sells two products: Product E7 and Product U7.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 $29.50 per DLH.The direct materials cost per unit is $164.10 for Product E7 and $289.50 for Product U7. The company is considering adopting an activity-based costing system with the following activity cost pools,activity measures,and expected activity:  The activity rate for the Production Orders activity cost pool under activity-based costing is closest to:
A)$77.03 per order 
B)$83.46 per order 
C)$82.48 per order 
D)$73.95 per order

Quizplus · Accepted Answer

Activity rate = Estimated overhead cost ÷ Total expected activity
= $58,422 ÷ 700 orders = $83.46 per order