Question

Deemer 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	$	93,000
Indirect labor	$	5,100

Distribution of Resource Consumption Across Activity Cost Pools:

	Activity Cost Pools
	Processing	Supervising		Other
Equipment expense	0.50	0.30		0.20
Indirect labor	0.50	0.30		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 F6	10,500	1,320
Product X0	1,360	1,320
Total	11,860	2,640

The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

Multiple Choice

• $11.15 per batch

• $37.16 per batch

• $3.23 per batch

• $6.45 per batch

Answer 1

activity rate for the Supervising activity cost pool
Equipment expense =$93000*0.30				$       27,900
Indirect labor =$5100*0.30				$         1,530
Total Cost				$       29,430
Total Batches				2640	Batches
Activity Rate ($29430/2640 batches)				$         11.15	Per batch
Correct Option : FIRST
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