Question
Adelberg Corporation makes two products: Product A and Product B. Annual production and sales are 500 units of Product A and 1,000 units of Product
Adelberg Corporation makes two products: Product A and Product B. Annual production and sales are 500 units of Product A and 1,000 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756.
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:
Expected Activity | |||||
Activity Cost Pool | Estimated Overhead Costs | Product A | Product B | Total | |
Activity 1 | $ | 31,031 | 1,000 | 300 | 1,300 |
Activity 2 | 22,249 | 1,600 | 300 | 1,900 | |
General Factory | 15,476 | 200 | 200 | 400 | |
Total | $ | 68,756 | |||
(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor-hours.) The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to:
Multiple Choice
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$13.91
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$11.71
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$74.16
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$36.19
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