Martin Corporation manufactures two productsPlows and Harrows. The annual production and sales of Plows is...
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Accounting
Martin Corporation manufactures two
productsPlows
and Harrows. The annual production and sales of Plows is
1,000
units, while
2,000
units of Harrows are produced and sold. The company has traditionally used direct labour hours to allocate its overhead to products. Plows require 5.0 direct labour hours per unit, while Harrows require 2.0 direct labour hours per unit. The total estimated overhead for the period is
$603,500.
The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools.
Activity cost pool
Estimated overhead cost
Expected activity: Plows
Expected activity: Harrows
Expected activity: Total
Setups
$50,000
200 batches
400 batches
600 batches
Machining
$337,500
1,700
machine hours
1,000
machine hours
2,700
machine hours
Assembly
$216,000
5,000
direct labour hours
4,000
direct labour hours
9,000
direct labour hours
Total
$603,500
The cost pool activity rate for Machining Costs would be closest to
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