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Adelberg Company has two products: A and B. The annual production and sales of Product A is 2,400 units and of Product B is 1,800
Adelberg Company has two products: A and B. The annual production and sales of Product A is 2,400 units and of Product B is 1,800 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 $106,575. 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 Order Size--with estimated overhead costs and expected activity as follows: Expected Activity Activity Cost Pools Activity 1 Activity 2 Order Size Total Estimated Overhead Costs $ 32,932 18,757 54,886 $106,575 Product A 1,700 2,400 1,200 Product B 1,300 900 1,440 Total 3,000 3,300 2,640 (Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.) The predetermined overhead rate under the traditional costing system is closest to: Multiple Choice $10.98 per DLH $5 68 ner DIH
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