Question
Binegar Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct
Binegar Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, R58G and R09O, about which it has provided the following data:
|
| R58G | R09O |
| Direct materials per unit........... | $15.90 | $52.40 |
| Direct labor per unit................. | $1.30 | $27.30 |
| Direct labor-hours per unit....... | 0.10 | 2.10 |
| Annual production................... | 30,000 | 10,000 |
The company's estimated total manufacturing overhead for the year is $1,617,600 and the company's estimated total direct labor-hours for the year is 24,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
| Activities and Activity Measures | Estimated Overhead Cost |
| Assembling products (DLHs)............... | $ 696,000 |
| Preparing batches (batches).................. | 252,000 |
| Product support (product variations).... | 669,600 |
| Total...................................................... | $1,617,600 |
|
| Expected Activity | ||
|
| R58G | R09O | Total |
| DLHs........................... | 3,000 | 21,000 | 24,000 |
| Batches........................ | 528 | 1,152 | 1,680 |
| Product variations........ | 1,056 | 1,176 | 2,232 |
1. The manufacturing overhead that would be applied to a unit of product R58G under the company's traditional costing system is closest to:
A) $6.74
B) $16.10
C) $22.84
D) $2.90
2. The manufacturing overhead that would be applied to a unit of product R09O under the activity-based costing system is closest to:
A) $113.46
B) $255.00
C) $141.54
D) $17.28
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