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:

Overhead costs:
Equipment expense	$	38,000
Indirect labor	$	6,600

Distribution of Resource Consumption Across Activity Cost Pools:
	Activity Cost Pools
	Processing			Supervising			Other
Equipment expense		0.60			0.20			0.20
Indirect labor		0.10			0.30			0.60

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:

Activity:
	MHs (Processing)				Batches (Supervising)
Product Z5		3,480				840
Product C8		8,520				560
Total		12,000				1,400

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

Answer 1

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"