Question Content Area

Miramar Industries manufactures two products: A and B. The manufacturing operation involves three overhead activitiesproduction setup, material handling, and general factory activities. Miramar uses activity-based costing to allocate overhead to products. An activity analysis of the overhead revealed the following estimated costs and activity bases for these activities:

ActivityCostActivity BaseProduction setup$250,000Number of setupsMaterial handling150,000Number of partsGeneral overhead80,000Number of direct labor hours

Each product's total activity in each of the three areas are as follows:

Product AProduct BNumber of setups100300Number of parts40,00020,000Number of direct labor hours8,00012,000

What is the activity rate for material handling?

a. $2.50 per part

b. $3.75 per part

c. $7.50 per part

d. $1.50 per part