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Olmo, Inc., manufactures and sells two products: Product KO and Product H9. The annual production...

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Olmo, Inc., manufactures and sells two products: Product KO and Product H9. The annual production and sales of Product of KO are 600 units and of Product, H9 is 600 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

Activity cost pools Activity measures Estimated Overhead costProduct KoProduct H9Total
Labor-relatedDLHS$550,7084,8002,4007,200
product ordres oders53,719700200900
Order sizeMHS836,3162,9003,6006,500
$1,440,743

The overhead applied to each unit of Product H9 under activity-based costing is closest to:

a. $1,097.82 per unit

b. $77196 per unit

c. $600.31 per unit

d. $305.96 per unit

Activity based costing

Activity based costing is a method of overhead allocation to different products based on the usage of that activity for that particular division or product etc.,

Answer and Explanation: 1

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Overhead rate per Activity as well as total overhead allocated to H9 is calculated as below:

Activity based overhead allocation

Activity...

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Activity Cost Pools: Definition & Examples

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Chapter 7 / Lesson 21
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Activity cost pools are groups of costs that are influenced by a common cost driver, determining how much each cost occurs. Identify various activity cost pools through several examples, noting the common cost driver for each.


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