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