Strama, Inc., manufactures and sells two products: Product A6 and Product 15. Th

Question

Strama, Inc., manufactures and sells two products: Product A6 and Product 15. The company has an activity- based costing system with the following activity cost pools, activity measures, and expected activity Estimated Expected Activity Activity overhead Activity cost Pools Measuzes Cost Product A6 Product I5 Total Labor-related Production orders orders 46,624 1,100 1,300 Order size DLHS $ 195,138 8,600 11,800 2,400 12,100 3,200 187,147 6,000 $ 428, 909 MHS 6,100 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: Multiple Choice $19 98 per MH 0 S6098 per MH $36 35 per MH $15.47 per MH

Explanation / Answer

Answer is $15.47 per MH

Order Size:

Estimated Overhead Cost = $187,147
Expected Activity Level = 12,100 machine-hours

Activity Rate = Estimated Overhead Cost / Expected Activity Level
Activity Rate = $187,147 / 12,100
Activity Rate = $15.47 per machine hour

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