Performance products corporation makes two products, titanium rims and posts. data regarding the two products follow: direct labor-hours per unit annual production rims 0.40 20,000 units posts 0.20 80,000 units additional information about the company follows: rims require $17 in direct materials per unit, and posts require $10. the direct labor wage rate is $16 per hour. rims are more complex to manufacture than posts and they require special equipment. the abc system has the following activity cost pools: estimated activity activity cost pool activity measure estimated overhead cost rims posts total machine setups number of setups $ 21,600 100 80 180 special processing machine-hours $ 180,000 4,000 0 4,000 general factory direct labor-hours $ 288,000 8,000 16,000 24,000 required: 1. compute the activity rate for each activity cost pool.

The activity rate for Machine setup, Special Processing, and General Factory  is $120 per machine setup, $45 per machine hours, $12 per direct labor hours respectively.

Explanation:

Computation of  the activity rate for each activity cost pool is shown below:

1. For Machine setup = Total Machine setup ÷ Number of Setup

                                  = $21600 ÷ 180

                                  = $120 per machine setup

2. For Special Processing = Special Processing ÷ Machine Hours

                                           = $180,000 ÷ 4,000

                                           = $45 per machine hours

3. For General Factory = General factory ÷ Direct labors hours

                                      = $288,000 ÷ $24,000

                                      = $12 per direct labor hours

Hence, the activity rate for Machine setup, Special Processing, and General Factory  is $120 per machine setup, $45 per machine hours, $12 per direct labor hours respectively.

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