Question

A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. Using activity-based costing, calculate the appropriate activity rate

Answer 1

Customer Service= $8 per call

Product Development= $15 per develop hour

Step-by-step explanation:

Giving the following information:

Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls.

Product Development with a total cost of $300,000 and a total activity of 20,000 development hours.

To calculate the activities rates, we need to use the following formula:

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

Customer Service= 200,000 / 25,000= $8 per call

Product Development= 300,000 / 20,000= $15 per develop hour