Wedd Corporation uses activity-based costing to assign overhead costs to product

Question

Wedd Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Processing, $27,200; Supervising, $9,300; and Other, $9,500. 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 appear below: MHs (Processing) Batches (Supervising) Product O6 9,200 500 Product D7 10,800 1,500 Total 20,000 2,000 The activity rate for the Processing activity cost pool under activity-based costing is closest to:

Explanation / Answer

Answer:-

Hence the activity rate for the Processing activity cost pool under activity-based costing is closest to:$1.36 per Machine hour.

Where :-

Activity Rate =   Estimated Overhead Cost $ / Expected Activity

Total Machine hours = 9200 hours (Product O6) + 10800 hours (Product D7)

= 20000 hours

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