Bohringer, Inc., manufactures and sells two products: Product A1 and Product X5. 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 $28.20 per DLH. The direct materials cost per unit is $256.50 for Product A1 and $165.20 for Product X5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to:
A)$40.46 per DLH
B)$1,390.21 per DLH
C)$89.20 per DLH
D)$66.90 per DLH

Question

Bohringer, Inc., manufactures and sells two products: Product A1 and Product X5. 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 $28.20 per DLH. The direct materials cost per unit is $256.50 for Product A1 and $165.20 for Product X5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:  The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to:
A)$40.46 per DLH 
B)$1,390.21 per DLH 
C)$89.20 per DLH 
D)$66.90 per DLH

Quizplus · Accepted Answer

To calculate the activity rate for the Labor-Related activity cost pool under activity-based costing, we need to divide the total expected cost of the activity pool by the total expected activity in DLHs.

Total expected cost of the Labor-Related activity cost pool = $2,191,200 + $1,536,840 = $3,728,040

Total expected activity for the Labor-Related activity cost pool = 108,000 DLHs

Activity rate for the Labor-Related activity cost pool = Total expected cost of the activity pool / Total expected activity in DLHs

= $3,728,040 / 108,000 DLHs

= $34.45 per DLH

Therefore, the closest option for the activity rate for the Labor-Related activity cost pool is A) $40.46 per DLH.