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

To calculate the activity rate for the Production Orders activity cost pool, we need to divide the total cost of the activity pool by the total number of activity measures. 
Total cost of Production Orders activity cost pool = $1,264,500
Total number of production orders = 15,300
Activity rate = 1,264,500/15,300 = $82.48 per order (rounded to the nearest cent)
Therefore, the closest answer choice is B) $83.46 per order.