Doede Corporation Uses Activity-Based Costing to Compute Product Margins

question 115

Multiple Choice

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Distribution of Resource Consumption Across Activity Cost Pools:
In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.
Activity:
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
Sales and Direct Cost Data:
The activity rate for the Machining activity cost pool under activity-based costing is closest to:

• A) $1.50 per MH
• B) $2.82 per MH
• C) $4.80 per MH
• D) $2.76 per MH

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