Johnson Manufacturing
Johnson Manufacturing Anticipates Incurring $500 000 in Overhead

Johnson Manufacturing
Johnson Manufacturing anticipates incurring $500 000 in overhead costs this year. After implementing activity-based costing (ABC) , the company’s controller identified the following related information:
$$\begin{array} { l l c } \text { Activity } & \text { Allocation Base } & \text { Proportion of Overhead Cost } \\\hline \text { Purchasing } & \text { Number of purchase orders } & 20 \% \\\text { Machine setups } & \text { Number of setups } & 15 \% \\\text { Production } & \text { Number of machine hours } & 65 \%\end{array}$$
The number of activities expected is as follows:
$\begin{array}{llcc} \text { Total number of purchase orders } &4000\\ \text { Total number of setups } &2000\\ \text { Total number of machine hours} &10000\\\end{array}$

-What will be the overhead rate for the production activity?

A) $32.50
B) $50.00
C) $ .03
D) $31.25

Correct Answer:

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