Question
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
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$5.99 per DLH
-
$31.77 per DLH
-
$61.68 per DLH
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$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
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$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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