EXERCISE 4–2 Compute Activity Rates LO4–2 Rustafson Corporation is a diversified manufacturer of consumer goods. The company’s activity-based costing system has the following seven activity cost pools:

Activity Cost Pool Estimated Overhead Cost Expected Activity

. . . . . . $52,000 8,000 direct labor-hours

. . . . $15,000 20,000 machineMachine setups Production orders Product testing Packaging General factory Labor-related Machine-related Machine setups Production orders Shipments Activity Cost Pool Estimated Overhead Cost Expected Activity hours

. . . . $42,000 1,000 setups

. . . $18,000 500 orders

. . . . . $48,000 2,000 tests

. . . . . . . . . $75,000 5,000 packages

. . . . . $108,800 8,000 direct labor-hours Required:

1. Compute the activity rate for each activity cost pool.

2. Compute the company’s predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours.