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Adams Company has two products: A and B. The annual production and sales of Product A is 1, 800 units and of Product B is
Adams Company has two products: A and B. The annual production and sales of Product A is 1, 800 units and of Product B is 1, 200 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.5 direct labor-hours per unit and Product B requires 0.8 direct labor-hours per unit. The total estimated overhead for next period is $99, 975. 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 General Factory-with estimated overhead costs and expected activity as follows: The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to
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