Tesh, Inc., manufactures and sells two products: Product P9 and Product I9. Data
ID: 2424736 • Letter: T
Question
Tesh, Inc., manufactures and sells two products: Product P9 and Product I9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to:
$142.93 per DLH
$18.72 per DLH
$214.40 per DLH
$1,041.27 per DLH
Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product P9 200 7.0 1,400 Product I9 400 6.0 2,400 Total direct labor-hours 3,800Explanation / Answer
Answer: $18.72 per DLH
Calculation of the activity rate for the Labor-Related activity cost pool under activity-based costing is :
Activity rate for the labor =Total Estimated cost/Total Direct Labor hours
71136/3800 hours=$18.72 per DLH
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