Minon, Inc., manufactures and sells two products: Product J1 and Product E7. 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 $19.90 per DLH. The direct materials cost per unit for each product is given below: 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 Labor-Related activity cost pool under activity-based costing is closest to:
A)$138.90 per DLH
B)$33.26 per DLH
C)$208.35 per DLH
D)$1,637.37 per DLH

Question

Minon, Inc., manufactures and sells two products: Product J1 and Product E7. 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 $19.90 per DLH. The direct materials cost per unit for each product is given below:  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 Labor-Related activity cost pool under activity-based costing is closest to:
A)$138.90 per DLH 
B)$33.26 per DLH 
C)$208.35 per DLH 
D)$1,637.37 per DLH

Quizplus · Accepted Answer

To find the activity rate for the Labor-Related activity cost pool under activity-based costing, we need to divide the total cost of the activity pool by the total activity level.

Total cost of Labor-Related activity pool = $546,000
Total expected direct labor-hours = 16,400 DLHs

Activity rate = Total cost of activity pool / Total activity level
Activity rate = $546,000 / 16,400 DLHs
Activity rate = $33.26 per DLH