Health Food company produces two exclusive products: food package to lose weight and food package to stabilize weight. The company has the following actual and budgeted data:

Budgeted overhead $360,000

Expected activity (DLH) 100,000 Actual activity (DLH) 100,000

Actual overhead $380,000

Food package to lose weight Food package to stabilize weight

Units produced 10,000 100,000

Prime costs 78,000 . 738,000

Direct labor hours 10,000 90,000

Required:

1. Please calculate the pre-determined overhead rate! (5 Points)
2. What is your opinion if Health food company use Activity based costing (ABC)? Is it possible?

Please explain by providing illustrations of the activities, cost drivers, and calculations! (5 Points)