Question
Company AA manufactures and sells two products: Product O6 and Product K2. Data concerning the expected production of each product and the expected total direct
Company AA manufactures and sells two products: Product O6 and Product K2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product O6 400 6.0 2,400 Product K2 900 4.0 3,600 Total direct labor-hours 6,000
The direct labor rate is $23.20 per DLH. The direct materials cost per unit for each product is given below:
Direct Materials Cost per Unit Product O6 $291.10 Product K2 $135.30
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost
Product O6
Product K2
Total Labor-related DLHs $136,380 2,400 3,600 6,000 Machine setups setups 53,690 400 600 1,000 General factory MHs 418,416 3,400 3,500 6,900 $608,486
The activity rate for the Machine Setups activity cost pool is closest to:
$123.06 per setup
$119.55 per setup
$88.19 per setup
$53.69 per setup
Company AA manufactures and sells two products: Product O6 and Product K2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
| Expected Production | Direct Labor-Hours Per Unit | Total Direct Labor-Hours | |
| Product O6 | 400 | 6.0 | 2,400 |
| Product K2 | 900 | 4.0 | 3,600 |
| Total direct labor-hours | 6,000 |
The direct labor rate is $23.20 per DLH. The direct materials cost per unit for each product is given below:
| Direct Materials Cost per Unit | |
| Product O6 | $291.10 |
| Product K2 | $135.30 |
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
| Estimated | Expected Activity | ||||
| Activity Cost Pools | Activity Measures | Overhead Cost | Product O6 | Product K2 | Total |
| Labor-related | DLHs | $136,380 | 2,400 | 3,600 | 6,000 |
| Machine setups | setups | 53,690 | 400 | 600 | 1,000 |
| General factory | MHs | 418,416 | 3,400 | 3,500 | 6,900 |
| $608,486 | |||||
The activity rate for the Machine Setups activity cost pool is closest to:
$123.06 per setup | ||
$119.55 per setup | ||
$88.19 per setup | ||
$53.69 per setup |
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