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

## Question:

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 cost | Product Ko | Product H9 | Total |

Labor-related | DLHS | $550,708 | 4,800 | 2,400 | 7,200 |

product ordres | oders | 53,719 | 700 | 200 | 900 |

Order size | MHS | 836,316 | 2,900 | 3,600 | 6,500 |

$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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View this answerOverhead rate per Activity as well as total overhead allocated to H9 is calculated as below:

**Activity based overhead allocation**

Activity... |
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Chapter 7 / Lesson 21Activity 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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