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Strama, Inc
Strama, Inc., manufactures and sells two products Product A6 and Product 15. The company has an activity- based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Overhead Activity Cost Pools Measures Cost Product A6 Product 15 Total Labor-related DLHS $197, 138 8,800 3,400 12,200 Production orders orders 47,624 1,200 1,400 2,600 Order size MHS 189, 147 6,200 6,300 12,500 $433,909 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: Multiple Choice $19.58 per MH $57.98 per MH $35.57 per MH $15.13 per MH
Expert Solution
The correct answer is Option(d) $15.13 per MH
Explanation
The activity rate of the Order Size Activity
= Estimated Overhead Cost / Expected Total Activity
= $189147 / 12500 MH
= $ 15.13 per MH
It is seen from the above explanation that option(a), option (b) and option(c) are incorrect answers.
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