Question

Vandalay Industries manufactures two​ products: toasters and blenders. The annual production and sales of toasters is

2,400

​units, while

1,300

units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per​ unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is

$146,215.

The company is looking at the possibility of changing to an

activityminus−based

costing system for its products. If the company used an

activityminus−based

costing​ system, it would have the following three activity cost​ pools:

		Expected activity
Activity cost pool	Estimated overhead cost	Toasters	Blenders	Total
Setup costs	$8,485	225 batches	450 batches	675 batches
Engineering costs	$68,980	890 engineering	880 engineering hours	1,770 engineering hrs
Maintenance costs	$68,750	2,770 direct labor hours	1,195 direct labor hours	3,965 direct labor hours
Total	​$146,215

The cost pool activity rate for Engineering Costs would be closest to​ (Round all answers to two decimal​ places.)

A.

$17.34

per engineering hour.

B.

$57.72

per engineering hour.

C.

$12.57

per engineering hour.

D.

$38.97

per engineering hour.

Answer 1

Answer:

Cost pool activity rate for Engineering Costs               = Estimated overhead cost   / Total engineering hours             =    $68,980 / 1,770 engineering hours             = $38.97 engineering hours

Cost pool activity rate for Engineering Costs     = $38.97 engineering hours

From given options, option (d) is correct,i.e, $38.97 engineering hours