Miramar Industries manufactures two products, A and B. The

Miramar Industries manufactures two products, A and B. The manufacturing operation involves three overhead activities - production setup, material 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:

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

9,000

12,000

What is the activity rate for General Overhead?

$4.00 per direct labor hour

$3.81 per direct labor hour

$6.71 per direct labor hour

$4.20 per direct labor hour



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