Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:

Activity Cost Pool Estimated Overhead Cost Expected Activity
Labor-related $52,000 8,000 direct labor-hours
Machine-related $15,000 20,000 machine-hours
Machine setups $42,000 1,000 setups
Production orders $18,000 500 orders
Product testing $48,000 2,000 tests
Packaging $75,000 5,000 packages
General factory $108,800 8,000 direct labor-hours

Required:

Compute the activity rate for each activity cost pool.

Instructions are listed below.

Explanation:

To calculate the estimated overhead rate for each activity cost pool, we need to use the following formula:

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

Labor-related= 52,000/8,000= $6.5 per direct labor hour

Machine-related= 15,000/20,000= $0.75 machine-hour

Machine setups= 42,000/1,000= $42 per setup

Production orders= 18,000/500= $36 per order

Product testing= 48,000/2,000= $24 per test

Packaging= 75,000/5,000= $15 per package

General factory= 108,800/8,000= $13.6 per direct labor-hour

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