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 General Factory activity cost pool under activity-based costing is closest to:
A)$52.60 per MH
B)$66.40 per MH
C)$124.76 per MH
D)$54.06 per MH

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 General Factory activity cost pool under activity-based costing is closest to:
A)$52.60 per MH 
B)$66.40 per MH 
C)$124.76 per MH 
D)$54.06 per MH

Quizplus · Accepted Answer

First, we need to calculate the overhead cost for each activity cost pool:

- Machine Setup: $50,000
- General Factory: $246,600
- Other Overhead: $54,400

Then, we calculate the activity rate for each activity cost pool by dividing the overhead cost by the total expected activity:

- Machine Setup: $50,000 / 1,500 MHs = $33.33 per MH
- General Factory: $246,600 / 3,700 MHs = $66.49 per MH
- Other Overhead: $54,400 / 2,000 units = $27.20 per unit

Therefore, the activity rate for the General Factory activity cost pool under activity-based costing is closest to $66.40 per MH (answer B), which is the correct choice.