Chrzan, Inc., manufactures and sells two products: Product E0 and Product N0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Expected Direct Labor- Total Direct
Production Hours Per Unit Labor-Hours
Product E0 330 9.3 3,069
Product N0 1,150 8.3 9,545
Total direct labor-hours 12,614
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Estimated Expected Activity
Activity Cost Pools Activity Overhead Product E0 Product N0 Total
Measures Cost
Labor-related DLHs $297,890 3,069 9,545 12,614
Production orders Orders 57,087 450 550 1,000
Order size MHs 581,366 5,150 4,850 10,000
936,343
The activity rate for the Order Size activity cost pool under activity-based costing is closest to:.
A. $57.09 per MH
B. $58.14 per MH
C. $74.23 per MH
D. $31.21 per MH
Answers: 2
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