Question
Feauto Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct
Feauto 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, I63E and E76I, about which it has provided the following data:
| I63E | E76I | |||||
| Direct materials per unit | $ | 21.70 | $ | 65.10 | ||
| Direct labor per unit | $ | 18.40 | $ | 55.20 | ||
| Direct labor-hours per unit | 1.10 | 3.30 | ||||
| Annual production (units) | 90,000 | 30,000 | ||||
The company's estimated total manufacturing overhead for the year is $5,958,000 and the company's estimated total direct labor-hours for the year is 198,000.
The company is considering using a form 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) | $ | 4,950,000 | |
| Preparing batches (batches) | 176,000 | ||
| Product support (product variations) | 832,000 | ||
| Total | $ | 5,958,000 | |
| Expected Activity | |||
| I63E | E76I | Total | |
| DLHs | 99,000 | 99,000 | 198,000 |
| Batches | 1,260 | 790 | 2,050 |
| Product variations | 2,520 | 1,580 | 4,100 |
The manufacturing overhead that would be applied to a unit of product I63E under the company's traditional costing system is closest to:
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