Boesenhofer, Inc., manufactures and sells two products: Product N6 and Product N7.The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The activity rate for the Machine Setups activity cost pool is closest to:
A)$73.57 per setup
B)$91.81 per setup
C)$26.24 per setup
D)$28.32 per setup

Question

Boesenhofer, Inc., manufactures and sells two products: Product N6 and Product N7.The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:  The activity rate for the Machine Setups activity cost pool is closest to:
A)$73.57 per setup 
B)$91.81 per setup 
C)$26.24 per setup 
D)$28.32 per setup

Quizplus · Accepted Answer

To calculate the activity rate for Machine Setups activity cost pool, we need to divide the total cost of the activity pool by the total number of setups. 
Total cost of the Machine Setups pool = $551,250
Total number of setups = 6,000
Activity rate = Total cost of the activity pool / Total number of setups = $551,250 / 6,000 = $91.81 per setup 
Therefore, the closest answer choice is B. Activity rate = Estimated overhead cost ÷ Total expected activity
= $128,534 ÷ 1,400 setups = $91.81 per setup