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36a. Adelberg Company has two products: A and B. The annual production and sales of Product A is 2,300 units and of Product B is

36a.

Adelberg Company has two products: A and B. The annual production and sales of Product A is 2,300 units and of Product B is 1,700 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 $105,475.

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:

Estimated Expected Activity
Activity Cost Pools Overhead Costs Product A Product B Total
Activity 1 $ 32,592 1,600 1,200 2,800
Activity 2 18,564 2,300 800 3,100
Order Size 54,319 690 1,020 1,710
Total $ 105,475

(Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.)

The predetermined overhead rate under the traditional costing system is closest to:

Multiple Choice

  • $5.99 per DLH

  • $31.77 per DLH

  • $61.68 per DLH

  • $11.64 per DLH

b.

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:

Estimated Expected Activity
Activity Cost Pools Overhead Costs 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.)

The overhead cost per unit of Product B under the traditional costing system is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

  • $23.51

  • $6.95

  • $8.82

  • $39.18

c.

Adelberg Company has two products: A and B. The annual production and sales of Product A is 2,450 units and of Product B is 1,850 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 $107,100.

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:

Estimated Expected Activity
Activity Cost Pools Overhead Costs Product A Product B Total
Activity 1 $ 33,094 1,750 1,350 3,100
Activity 2 18,850 2,450 950 3,400
Order Size 55,156 735 1,110 1,845
Total $ 107,100

(Note: The Order Size 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:

Multiple Choice

  • $7.69

  • $5.54

  • $38.10

  • $31.50

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