Use this information for Miramar Industries to answer the question that follow.

Question

Use this information for Miramar Industries to answer the question that follow.

Miramar Industries manufactures two products: A and B. The manufacturing operation involves three overhead activities—production setup, materials 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:

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

What is the activity rate for materials handling?

Activity Cost Activity Base Production setup $250,000 Number of setups Material handling 150,000 Number of parts General overhead 80,000 Number of direct labor hours

Explanation / Answer

Totol number of parts = 40,000 from product A + 20,000 from Product B

= 60,000 parts

Activity rate for material handling = Material handling cost / Total number of parts

= $150,000 / 60,000 parts

= $2.5

Activity rate for material handling is $2.5 per part.

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