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Abel Corporation uses activity-based costing. The company makes two products: Product A and Product B. The annual production and sales of Product A is 200 units and of Product B is 400 units. There are three activity cost pools, with total cost and activity as follows: Total Activity Activity Cost Pools Total Cost Product A Product B Total Activity 1 $ 16,660 600 100 700 Activity 2 $ 18,450 1,100 700 1,800 Activity 3 $ 9,731 60 160 220 The activity rate for Activity 2 is closest to:

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Answer:

Predetermined manufacturing overhead rate (Activity 2) = $10.25 unit of activity

Explanation:

Giving the following information:

Activity 2 $ 18,450 1,100 700 1,800

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

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

Predetermined manufacturing overhead rate= 18,450 / 1,800

Predetermined manufacturing overhead rate= $10.25 unit of activity

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