Adelberg Company has two products: A and B. The annual production and sales of Product A is 1,950 units and of Product B is 1,350 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products.
Product A requires 0.5 direct labor-hours per unit and Product B requires 0.8 direct labor-hours per unit. The total estimated overhead for next period is $101,600. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and Order Size--with estimated overhead costs and expected activity as follows:
Total EstimatedOverheadCosts Expected Activity
Product A Product B Total
Activity 1 $ 31,394 1,250 850 2,100
Activity 2 17,882 1,950 450 2,400
Order Size 52,324 975 1,080 2,055
Total $ 101,600
(Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.)
Required:
a. The predetermined overhead rate (i. e., activity rate) for Activity 2 under the activity-based costing system is closest to .