Question
Diemer, Inc., manufactures and sells two products: Product N4 and Product R7. Data concerning the expected production of each product and the expected total direct
Diemer, Inc., manufactures and sells two products: Product N4 and Product R7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Expected Production | Direct Labor-Hours Per Unit | Total Direct Labor-Hours | |
Product N4 | 200 | 9.0 | 1,800 |
Product R7 | 900 | 8.0 | 7,200 |
Total direct labor-hours | 9,000 |
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Estimated | Expected Activity | ||||
Activity Cost Pools | Activity Measures | Overhead Cost | Product N4 | Product R7 | Total |
Labor-related | DLHs | $357,120 | 1,800 | 7,200 | 9,000 |
Production orders | orders | 20,797 | 400 | 300 | 700 |
General factory | MHs | 358,425 | 3,800 | 3,700 | 7,500 |
$736,342 |
If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to:
| a. | $39.68 per DLH | |
| b. | $81.82 per DLH | |
| c. | $29.71 per DLH | |
| d. | $47.79 per DLH |
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Financial Accounting An Introduction to Concepts, Methods and Uses
Authors: Roman L. Weil, Katherine Schipper, Jennifer Francis
14th edition
978-1111823450, 1-133-36617-1 , 1111823456, 978-1-133-3661, 978-1133591023
