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