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Addy Company has two products: A and B. The annual production and sales of Product A is 1,700 units and of Product B is
Addy Company has two products: A and B. The annual production and sales of Product A is 1,700 units and of Product B is 1,100 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 $98,785. 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: Activity Estimated Overhead Expected Activity Cost Pool Costs Product A Product B Total Activity 1 $30,528 1,000 600 1,600 Activity 2 $17,385 1,700 200 1,900 General Factory $50,872 510 Total 660 1,170 $98.785 (NOTE: THE GENERAL FACTORY ACTIVITY COST POOL'S COSTS ARE ALLOCATED ON THE BASIS OF DIRECT LABOR-HOURS.) NOTE: DEPENDING ON ROUNDING, YOUR ANSWERS SHOULD COME TO WITHIN A DOLLAR OF THE CORRECT ANSWER. The predetermined overhead rate under the traditional costing system is closest to: The predetermined overhead rate under the traditional costing system is closest to: $9.15. $43.48. $84.43. $19.08.
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