Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Miramar Industries manufactures two products: A and B. The manufacturing operation involves three overhead activities—production setup, materials handling, and general factory activities. Miramar uses activity-based costing to allocate overhead to products. An activity analysis of the overhead revealed the following estimated costs and activity bases for these activities:
Each product's total activity in each of the three areas are as follows:
What is the activity rate for production setup?
| Activity | Cost | Activity Base |
| Production setup | $250,000 | Number of setups |
| Material handling | 150,000 | Number of parts |
| General overhead | 80,000 | Number of direct labor hours |
Each product's total activity in each of the three areas are as follows:
| Product A | Product B | |
| Number of setups | 100 | 300 |
| Number of parts | 40,000 | 20,000 |
| Number of direct labor hours | 8,000 | 12,000 |
What is the activity rate for production setup?
a.$625 per setup
b.$2,500 per setup
c.$833 per setup
d.$400 per setup
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