Ollivier Corporation has an activitybased costing system wit

Ollivier Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:

Activity Cost Pools

Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company\'s two products follow:

The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

$24.54 per batch

$53.77 per batch

$49.07 per batch

$91.75 per batch

Ollivier Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:

Solution

Calculation of The activity rate for the Supervising activity cost pool under activity-based costing Step 1 Allocation of overhead costs to Supervising activity Overhead cost Cost allocated to supervising activity Equipment expense ($90000 * 0.60) $54,000.00 Indirect Labour ($14600 *0.50) $7,300.00 Total cost allocated to supervising activity $61,300.00 Step 2 Activity rate of Supervising activity cost pool = Total cost allocated to supervising activity / Total no.of batches Activity rate of Supervising activity cost pool = $61,300 / 1140 batches = $53.77 per batch The activity rate for the Supervising activity cost pool under activity-based costing is closest to: $53.77