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ACME Company makes two products, Basic and Deluxe. Below is a table showing the use by each product of various activities: Basic Deluxe Total Estimated

ACME Company makes two products, Basic and Deluxe. Below is a table showing the use by each product of various activities:

Basic Deluxe Total
Estimated Production in units 10,000 2,000 12,000
Estimated Set Ups 15 10 25
Estimated Direct Labor Hours 6,000 3,000 9,000
Estimated Machine Hours 9,000 6,000 15,000

Overhead cost drivers and related costs follow:

Cost Driver Cost
Setups $150,000
Direct Labor Hours $180,000
Machine hours $270,000
Total Overhead $600,000

1. The company does not use activity based costing (ABC) but a traditional costing method using direct labor hours as the allocation base. What is the overhead allocation rate per direct labor hour under the traditional costing system?

A. $20

B. $30

C. $40

D. $60

E. $66.67

2. The company does not use activity based costing (ABC) but a traditional costing method using direct labor hours as the allocation base. What is the overhead cost per unit of deluxe?

A. $50

B. $66.67

C. $150

D. $100

E. $44.44

3. The company uses activity based costing (ABC). How much of the total $600,000 overhead is allocated to Deluxe products?

A. $180,000

B. $100.000

C. $228,000

D. $300,000

E. $200,000

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