Abel Corporation uses activity-based costing. The company makes two products: Product A and Product B. The annual production and sales of Product A is 370 units and of Product B is 740 units. There are three activity cost pools, with total cost and activity as follows: Total Activity
Activity Cost Pools Total Cost Product A Product B Total
Activity 1 $23,205 900 150 1,050
Activity 2 $38,850 1,950 1,550 3,500
Activity 3 $10,598 145 245 390
The activity rate for Activity 2 is closest to:.
a. 43.17.
b. 25.06.
c. 19.92.
d. 11.10.

Predetermined manufacturing overhead rate (A2)= $11.1

Explanation:

Giving the following information:

Total Activity

Activity Cost Pools Total Cost Total

Activity 2 $38,850 3,500

To calculate the activity rate, we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate (A2)= 38,850 / 3,500

Predetermined manufacturing overhead rate (A2)= $11.1

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