Huelskamp Corporation has provided the following data concerning its overhead costs for the coming year: The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:
The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Assembly activity cost pool is closest to:
A) $2.65 per labor-hour
B) $3.85 per labor-hour
C) $2.85 per labor-hour
D) $2.75 per labor-hour

Question

Huelskamp Corporation has provided the following data concerning its overhead costs for the coming year:  The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:
 The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.The distribution of resource consumption across activity cost pools is given below:
 The activity rate for the Assembly activity cost pool is closest to:
A) $2.65 per labor-hour 
B) $3.85 per labor-hour 
C) $2.85 per labor-hour 
D) $2.75 per labor-hour

Quizplus · Accepted Answer

To find the activity rate for the Assembly activity cost pool, we need to divide the total cost of the Assembly activity cost pool by the estimated activity level for the Assembly activity cost pool. 
Total cost of Assembly activity cost pool = $398,000 
Estimated activity for Assembly activity cost pool = 140,000 labor-hours 
Activity rate for Assembly activity cost pool = $398,000 ÷ 140,000 labor-hours = $2.85 per labor-hour. 
Therefore, the closest activity rate to the Assembly activity cost pool is $2.85 per labor-hour, so the best choice is C.

Huelskamp Corporation Has Provided the Following Data Concerning Its Overhead