Question

# Ollivier Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other. In...

 Ollivier Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
 Overhead costs: Equipment expense \$90,000 Indirect labor \$14,600
 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Processing Supervising Other Equipment expense 0.30 0.60 0.10 Indirect labor 0.30 0.50 0.20
 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:
 Activity: MHs (Processing) Batches (Supervising) Product C4 9,400 570 Product L7 1,900 570 Total 11,300 1,140
 The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

\$24.54 per batch

\$53.77 per batch

\$49.07 per batch

\$91.75 per batch

 Calculation of The activity rate for the Supervising activity cost pool under activity-based costing Step 1 Allocation of overhead costs to Supervising activity Overhead cost Cost allocated to supervising activity Equipment expense (\$90000 * 0.60) \$54,000.00 Indirect Labour (\$14600 *0.50) \$7,300.00 Total cost allocated to supervising activity \$61,300.00 Step 2 Activity rate of Supervising activity cost pool = Total cost allocated to supervising activity / Total no.of batches Activity rate of Supervising activity cost pool = \$61,300 / 1140 batches = \$53.77 per batch The activity rate for the Supervising activity cost pool under activity-based costing is closest to: \$53.77

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