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MC Qu. 137 Adams Company has two products: A and B. The... Adams Company has two products: A and B. The annual production and sales
MC Qu. 137 Adams Company has two products: A and B. The... Adams Company has two products: A and B. The annual production and sales of Product A is 1,750 units and of Product B is 1,150 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.7 direct labor-hours per unit. The total estimated overhead for next period is $99,400, 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: Total Total Activity 1 Activity 2 General Factory Total Estimated Overhead Costs $30,715 17,494 51,191 $99,400 Expected Activity Product A Product B 1,050 650 1,750 250 700 805 1,700 2,000 1,505 (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor-hours.) The overhead cost per unit of Product B under the traditional costing system is closest to: $19,34 $26.90 $46 24 $13.77
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