Answer to Question #245151 in Economics for Bili

Question

Required: a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. . It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed below: Activity Cost Pool and Activity Measure Estimated Overhead cost Activity Deluxe Regular Total Purchase orders (number of orders) $ 60,000 500 1,000 1,500 Rework requests (number of requests) 280,000 800 2,000 2,800 Product testing (number of tests) 240,000 7,000 3,000 10,000 Machine-related (machine-hours) 2,500,000 4,500 8,000 12,500 $3,080,000 Required: b. Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools.

Answer 1

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