Manton Corporation uses an activity based costing system to assign overhead cost

Question

Manton Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs—equipment expense and indirect labor—are allocated to the three activity cost pools—Processing, Supervising, and Other—based on resource consumption. Data to perform these allocations appear below:

In the second stage, 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 cost pool are not assigned to products. Activity data for the company's two products follow:

The activity rate for the Processing activity cost pool under activity-based costing is closest to:

Noreen 4e Rechecks 2017-24-03

$.80 per MH

$1.96 per MH

$1.90 per MH

$3.90 per MH

Explanation / Answer

cost allocated to processing= [38000*.60]+[6600*.10]

                      = 22800+660.

                      = 23460

activity rate for the Processing activity cost pool =Total cost /total activity

       = 23460 /12000

        = $ 1.955 per MH [rounded to 1.96]

correct option is "B"

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