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12 November, 19:58

Provenzano Corporation manufactures two products: Product B56Z and Product D32N. The company is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products B56Z and D32N. Activity Cost Pool Activity Measure Total Cost Total Activity Machining Machine-hours $ 330,000 15,000 MHs Machine setups Number of setups $ 50,000 100 setups Product design Number of products $ 88,000 2 products Order size Direct labor-hours $ 280,000 10,000 DLHs Activity Measure Product B56Z Product D32N Machine-hours 6,000 9,000 Number of setups 80 20 Number of products 1 1 Direct labor-hours 6,000 4,000 What is the activity rate for the Machining activity cost pool

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  1. 12 November, 20:10
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    Estimated manufacturing overhead rate = $22 per machine hour

    Explanation:

    Giving the following information:

    Provenzano Corporation manufactures two products: Product B56Z and Product D32N. The company is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools.

    Machining:

    Total Cost = 330,000

    Total Activity: Machine-hours = 15,000

    Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

    Estimated manufacturing overhead rate = 330,000/15,000 = $22 per machine hour
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