Adelberg Company has two products: A and B. The annual production and sales of Product A is 2,050 units and of Product B is 1,450 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.7 direct labor-hours per unit. The total estimated overhead for next period is $102,700.
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:
Activity Cost Pools Estimated Overhead Costs Expected Activity
Product A Product B Total
Activity 1 $ 31,734 1,350 950 2,300
Activity 2 18,075 2,050 550 2,600
Order Size 52,891 820 1,015 1,835
Total $ 102,700
(Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.)
Required:
1. The predetermined overhead rate (i. e., activity rate) for Activity 2 under the activity-based costing system is closest to .