Addy Company has two products: A and B. The annual production and sales of Product A is 2,600 units and of Product B is 2,000 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labor-hours per unit and Product B requires 0.6 direct labor-hours per unit. The total estimated overhead for next period is $108,775.
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 General Factory--with estimated overhead costs and expected activity as follows:
| Activities |
Estimated
Overhead
Costs |
Expected Activity |
| Product A |
Product B |
Total |
| Activity 1 |
$33,611 |
1,900 |
1,500 |
3,400 |
| Activity 2 |
19,144 |
2,600 |
1,100 |
3,700 |
| General Factory |
56,020
|
1,500 |
1,740 |
3,240
|
| Total |
$108,775
|
|
|
|
| (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor-hours.) |
The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to?