Markham Company makes two products: Basic Product and Deluxe Product. Annual production and sales are 1,900 units of Basic Product and 1,500 units of Deluxe Product. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Basic Product requires 0.4 direct labor hours per unit and Deluxe Product requires 0.8 direct labor hours per unit. The total estimated overhead for next period is $99,635. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as follows: Activity Cost Pool Activity 1 Activity 2 General Factory Total Estimated Overhead Costs $30,732 17,640 51, 263 $99,635 Expected Activity Basic Deluxe Product Product Total 1,400 700 2,100 2,000 300 2,300 760 1,200 1,960 (Note: The General Factory costs are allocated on the basis of direct labor hours.) The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to: Multiple Choice $7.67. O $43.32 O O $9.28 O O $50.83 Upton 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, Long and Short, about which it has provided the following data: Direct materials per unit Direct labor per unit Direct labor-hours per unit Annual production Long Short $ 14.20 $ 48.30 $ 16.80 $ 50.40 $ 0.80 2.40 53,000 11,600 The company's estimated total manufacturing overhead for the year is $3,155.360 and the company's estimated total direct labor-hours for the year is 70.240. 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 Direct labor support (DLHS) Setting up machines (setups) Part administration (part types) Total Estimated Overhead Cost $1,700,000 426,240 1,029,120 $3,155,360 DLHS Setups Part types Expected Activity Long Short Total 42,400 27,840 70,240 1,300 1,660 2,960 1,140 2,700 3,840 Unit overhead cost of Product Short under the activity-based costing system is closest to: Multiple Choice O $224.25. O $141.07 O $83.18 $190.04
