Taylor Company has identified 4 different activity pools for its overhead costs,

Question

Taylor Company has identified 4 different activity pools for its overhead costs, allocated costs to each pool and estimated activity levels as summarized in the following tables:

1. What is the activity rate for pool 2?

2. What is the activity rate for pool 4?

3. Assume Fuller used a single plant-wide rate based on direct labor hours. What would that rate be? (Round the rate to the nearest dollar.)

Estimated activity levels for the year Pool 1 Number of setups 1200 Pool 2 Inspection hours 6000 Pool 3 Machine hours 48000 Pool 4 Number of parts 26200 Direct labor hours 38400 Direct materials cost 2096000

Explanation / Answer

1) Activity rate for pool 2 = 252000/6000 = 42 per inspection hour

2) Activity rate for pool 4 = 550200/26200 = 21 per parts

3) Plant wide overhead rate = 1330200/38400 = 35 per labour hour

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