Question
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
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 labour hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour hours per unit, and Product B requires 0.6 direct labour 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 poolsActivity 1, Activity 2, and General Factorywith estimated overhead costs and expected activity as follows:
Estimated | ||||
Activity | 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 | 660 | 1,170 |
Total | $98,785 |
The General Factory activity cost pool's costs are allocated on the basis of direct labour hours.)
A. | The predetermined overhead rate under the traditional costing system is closest to which of the following? |
B. | The overhead cost per unit of Product B under the traditional costing system is closest to which of the following? |
C. | The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to which of the following? |
D. | The overhead cost per unit of Product B under the activity-based costing system is closest to which of the following? |
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