Mcleese, Inc., manufactures and sells two products: Product I6 and Product L1. 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 $26.60 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 Machine Setups activity cost pool under activity-based costing is closest to:
A)$103.32 per setup
B)$63.58 per setup
C)$89.04 per setup
D)$100.60 per setup

Question

Mcleese, Inc., manufactures and sells two products: Product I6 and Product L1. 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 $26.60 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 Machine Setups activity cost pool under activity-based costing is closest to:
A)$103.32 per setup 
B)$63.58 per setup 
C)$89.04 per setup 
D)$100.60 per setup

Quizplus · Accepted Answer

To find the activity rate for the Machine Setups activity cost pool, we need to divide the total cost of the activity pool by the total activity level.

Total cost of Machine Setups activity cost pool = $266,000 
Total number of setups = 4,200

Activity rate for Machine Setups activity cost pool = $266,000 / 4,200 = $63.58 per setup

Therefore, the closest answer is B, $63.58 per setup.