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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

  • $13.91

  • $11.71

  • $74.16

  • $36.19

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