1.Markham Company makes two products: Basic Product and DeluxeProduct. Annual production and sales are 1,800 units of BasicProduct and 1,400 units of Deluxe Product. The company hastraditionally used direct labor-hours as the basis for applying allmanufacturing overhead to products. Basic Product requires 0.3direct labor hours per unit and Deluxe Product requires 0.6 directlabor hours per unit. The total estimated overhead for next periodis $99,585.

The company is considering switching to an activity-basedcosting system for the purpose of computing unit product costs forexternal reports. The new activity-based costing system would havethree overhead activity cost pools—Activity 1, Activity 2, andGeneral Factory—with estimated overhead costs and expected activityas follows:

	Estimated				Expected Activity
Activity Cost Pool	Overhead Costs				Basic Product		Deluxe Product		Total
Activity 1	$	30,720			1,300		600		1,900
Activity 2		17,625			1,900		250		2,150
General Factory		51,240			540		840		1,380
Total	$	99,585

(Note: The General Factory activity cost pool's costs areallocated on the basis of direct labor hours.)

The predetermined overhead rate (i.e., activity rate) forActivity 2 under the activity-based costing system is closestto:

a. $8.20.

b. $46.32.

c. $72.16.

d. $9.79.

2.South Beach Industries reports the following information aboutresources. At the beginning of the year, South Beach estimated itwould spend $296,300 for materials, $48,500 for purchasing, $32,300for setups, and $45,000 for repairs.

	Cost Driver
	Rate			Volume
Resources used
Materials	$	16	/lb	18,800	lbs
Purchasing	$	270	/purchase order	170	purchase orders
Setups	$	400	/setup	85	setups
Repairs	$	45	/Job	800	jobs
Resources supplied
Materials	$	310,800
Purchasing	$	51,100
Setups	$	35,950
Repairs	$	40,900

Compute unused resource capacity for repairs for SouthBeach.

a. $4,900.

b. $9,000.

c. $4,100.

d. $3,900.

3. The manufacturing overhead budget at Levetron Corporation isbased on budgeted direct labor-hours. The direct labor budgetindicates that 7,700 direct labor-hours will be required in August.The variable overhead rate is $9.20 per direct labor-hour. Thecompany's budgeted fixed manufacturing overhead is $143,990 permonth, which includes depreciation of $25,640. All other fixedmanufacturing overhead costs represent current cash flows. Thecompany recomputes its predetermined overhead rate every month. Thepredetermined overhead rate for August should be:

a.$9.20.

b. $27.90.

c.$24.57.

d.$18.70.