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Marigold, Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats.

Activity Cost Pools Estimated Overhead Estimated Use of Cost Drivers per Activity
Designing $445,200 10,600 designer hours
Sizing and cutting 4,081,200 152,000 machine hours
Stitching and trimming 1,491,000 84,000 labor hours
Wrapping and packing 346,500 33,000 finished units

Compute the activity-based overhead rates using the following budgeted data for each of the activity cost pools.

Designing
Sizing and cutting
Stitching and trimming
Wrapping and packing

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Answer:

Designing= $42 per designer hour

Sizing and cutting= $26.85 per machine hour

Stitching and trimming= $17.75 per labor hour

Wrapping and packing= $10.5 finished unit

Explanation:

To calculate the activity-based overhead rates, we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Designing= 445,200/10,600= $42 per designer hour

Sizing and cutting= 4,081,200/152,000= $26.85 per machine hour

Stitching and trimming= 1,491,000/84,000= $17.75 per labor hour

Wrapping and packing= 346,500/33,000= $10.5 finished unit

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