Flemming Corporation Uses Activity-Based Costing to Compute Product Margins

question 125

Multiple Choice

Flemming Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Machining, Order Filling, and Other. The costs in those activity cost pools appear below: 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 data appear below:
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
The activity rate for Machining under activity-based costing is closest to:

• A) $7.30 per MH
• B) $2.04 per MH
• C) $2.09 per MH
• D) $0.83 per MH

---

Definitions:

Maturity Bond

A fixed-income security that repays the principal along with interest at the end of a specified period.

Forward Interest Rate

A future rate agreed upon for a financial transaction or investment that will be carried out at a later date.

Term Structure

The relationship between interest rates (or bond yields) and different terms (or maturities), typically depicted in a yield curve.

Expectations Theory

A theory suggesting that long-term interest rates reflect the market's expectation for future short-term rates.