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Gradwell, Inc., manufactures and sells two products Product K8 and Product 14. Data concerning the expected production of each product and the expected total direct

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Gradwell, Inc., manufactures and sells two products Product K8 and Product 14. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Direct Expected Labor-Hours Total Direct Production Per Unit Labor-Hours Product K8 300 5.0 1,500 Product 14 900 3.0 2,700 Total direct labor-hours 4.200 The direct labor rate is $17.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product K8 $ 150.20 Product 14 $ 243.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Activity Estimated Pools Measures Overhead Cost Expected Activity Product Product K8 14 Total Labor-related DLHS $176,064 1,500 2,700 4,200 Machine setups setups 71,290 400 600 1.000 Order size MHS 121.396 4.300 4,600 8.900 $368.750 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: O $13.64 per DLH $41.92 per DLH O $71.29 per DLH O $87.80 per DLH

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