2 Management is considering using activity based absorption costing to apply manufacturing overhead cost to products The activity based system would have the following four activity cost pools Activity Cost Pool Activity Measure Estimated Overhead Cost Purchasing Purchase orders issued $ 215,250 Processing Machine hours 4,950,000 Scrap rework Scrap rework orders issued 707,850 Shipping Number of shipments 792,000 $ 6,665,100 Expected Activity Activity Measure Deluxe Regular Total Purchase orders issued 410 820 1,230 Machine hours 22,000 33,000 55,000 Scrap rework orders issued 550 440 990 Number of shipments 5,280 7,920 13,200 Determine the predetermined overhead rate for each of the four activity cost pools Activity Cost Pool Predetermined Overhead Rate Purchasing per purchase order Processing per MH Scrap rework per order Shipping per shipment

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Question: 2. Management is considering using activity-based absorption costing to apply manufacturing overhead cost to products. The activity-based system would have the following four activity cost

2. Management is considering using activity-based absorption costing to apply manufacturing overhead cost to products. The activity-based system would have the following four activity cost pools:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost
Purchasing	Purchase orders issued	$	215,250
Processing	Machine-hours		4,950,000
Scrap/rework	Scrap/rework orders issued		707,850
Shipping	Number of shipments		792,000
		$	6,665,100

	Expected Activity
Activity Measure	Deluxe	Regular	Total
Purchase orders issued	410	820	1,230
Machine-hours	22,000	33,000	55,000
Scrap/rework orders issued	550	440	990
Number of shipments	5,280	7,920	13,200

Determine the predetermined overhead rate for each of the four activity cost pools.

Activity Cost Pool	Predetermined Overhead Rate
Purchasing		per purchase order
Processing		per MH
Scrap/rework		per order
Shipping		per shipment

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