Question
Cassidy Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct
Cassidy 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, VIP and Kommander, about which it has provided the following data:
VIP | Kommander | ||||||
Direct materials per unit | $ | 27.50 | $ | 62.10 | |||
Direct labor per unit | $ | 15.60 | $ | 52.00 | |||
Direct labor-hours per unit | 0.60 | 2.00 | |||||
Annual production | 40,400 | 15,400 | |||||
The company's estimated total manufacturing overhead for the year is $2,670,096 and the company's estimated total direct labor-hours for the year is 55,040.
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) | $ | 1,064,000 | ||
Preparing batches (batches) | 420,496 | |||
Product support (product variations) | 1,185,600 | |||
Total | $ | 2,670,096 | ||
Expected Activity | |||||
VIP | Kommander | Total | |||
DLHs | 24,240 | 30,800 | 55,040 | ||
Batches | 1,498 | 1,066 | 2,564 | ||
Product variations | 2,652 | 1,248 | 3,900 | ||
Unit overhead cost of Product Kommander under the activity-based costing system is closest to:
Multiple Choice
$74.65.
$198.63.
$222.55.
$123.98.
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