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Markham Company makes two products: Basic Product and Deluxe Product.Annual production and sales are 1,500 units of Basic Product and 1,100 units of Deluxe Product.
Markham Company makes two products: Basic Product and Deluxe Product.Annual production and sales are 1,500 units of Basic Product and 1,100 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 $99,435 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 Estimated'! Overhead Costs $30684 Deluxe Actuivity 1 Activity 2 General Foctory Total 1,000 850 4502,050 880 1,850 1600 600 7,580 1.480 $99,435 Note The General Factory activity cost pool's costs are allocated on the basis of direct labor hours) The overhead cost per unit of Deluxe Product under the activity-besed ting system is closest to O $2766 O $4850 $43 99 $4048
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