Addy Company makes two products: Product A and Product B. Annual production and sales are 1,800 units of Product A and 1,400 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.30 direct labor hours per unit and Product B requires 0.60 direct labor hours per unit. The total estimated overhead for next period is $115,688.

The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and General Factory--with estimated overhead costs and expected activity as follows:

			Expected Activity
Activity Cost Pool		Estimated Overhead Costs		Product A		Product B		Total
Activity 1		$41,080		1,900		700		2,600
Activity 2		18,304		1,800		280		2,080
General Factory		56,304		540		840		1,380
Total		$115,688

(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor hours.)

The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to:

A. $8.80

B. $40.80

C. $15.80

D. $83.83