Brisky Corporation uses activity-based costing to compute product margins. In th

Question

Brisky Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment depreciation and supervisory expense-to three activity cost pools-Machining, Order Filling, and Other-based on resource consumption. Data to perform these allocations appear below:

Overhead costs:
Equipment expense: $77,000
Indirect labor: $8,000

Distribution of Resource Consumption Across Activity Cost Pools:

....Processing...Supervising...Other
Equipment expense: 0.40___0.20___0.40
Indirect labor______0.30___ 0.20____0.50

Processing costs are assigned to products using machine-hours (MHs) and supervising costs are assigned to products using the number of batches. The costs in the other activity are not assigned to products. Activity data for the company's two products follow:
________MHs Processing______Batches (Supervising)
Product Z1........ 8,000........... 700
Product C6........12,000...........300
Total........20,000........1,000

Finally the the costs of processing and supervising are combined are the following sales and the direct cost data to determine product margins

Sales and Direct Cost Data
.....................Product Z1 Product C6
Sales (total): ............ $225,100 $154,100
Direct materials (total) $122,500 $51,000
Direct labor (total)........ $71,100 $72,400

The total activity rate for the supervising activity cost pool under activity based costing is closest to:
a. $8 per batch
b. $17 per batch
c. $26. 67 per batch
d. $85 per batch

Explanation / Answer

The total activity rate for the supervising activity cost pool under activity based costing is closest to:
a. $8 per batch
b. $17 per batch
c. $26. 67 per batch
d. $85 per batch

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