Reference no: EM132529154

Manton Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs-equipment expense and indirect labor-are allocated to the three activity cost pools-Processing, Supervising, and Other-based on resource consumption.

Data to perform these allocations appear below:

Overhead costs:

Equipment expense$42,500

Indirect labor$7,500

Distribution of Resource Consumption Across Activity Cost Pools:

Activity Cost Pools         Processing Supervising Other

Equipment expense          0.60          0.20          0.20

Indirect labor                 0.10             0.30            0.60

In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:

Activity: MHs (Processing) Batches (Supervising)

Product Z5   4,350                       1,200

Product C8   10,650                     800

Total          15,000                    2,000

Question 1: The activity rate for the Processing activity cost pool under activity-based costing is closest to:

$1.70 per MH

$3.70 per MH

$.59 per MH

$1.75 per MH