National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders.

Model	Annual Sales in Units
High F	10,100
Great P	16,100

National uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows:

	High F			Great P
Direct materials	$	38.10		$	25.50
Direct labor	$	17.70		$	13.30

Budget factory overhead:
Engineering and Design	2,420	engineering hours	$	411,400
Quality Control	12,850	inspection hours		282,700
Machinery	33,730	machine hours		573,410
Miscellaneous Overhead	26,410	direct labor hours		132,050
Total			$	1,399,560

National's controller had been researching activity-based costing and decided to switch to it. A special study determined National's two products have the following budgeted activities:

	High F	Great P
Engineering and design hours	970	1,450
Quality control inspection hours	5,650	7,200
Machine hours	20,290	13,440
Labor hours	12,010	14,400

What is the overhead application rate using the firm's volume-based costing system? (Rounded to the nearest percent or cents.)

Multiple Choice

• 356 percent of direct labor cost.

• $53.78 per direct labor-hour.

• 68.4 percent of direct labor cost.

• 5,378 percent of direct labor cost.

• 5,299 percent of direct labor cost.