Question
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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