Question 2

Cabat Company manufactures two products, Product C and Product D. The company estimated it would incur $177,910 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current period's operations appear below:

	product C	Product D
estimated volume	3,800 units	3,000 units
direct labor-hours per unit	1.20 hours	0.80 hours
direct materials cost per unit	$11.60	$23.70
direct labor cost per unit	$10.80	$7.20

Required:

a. Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year. b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:

Activity cost pool	estimated overhead costs	Product C	Product D	Total
machine setups	$12,190	110	120	230
purchase orders	75,240	820	1,160	1,980
general factory	90,480	4,560	2,400	6,960
total	$177,910

Determine the unit product cost of each product for the current period using the activity-based costing approach. General factory overhead is allocated based on direct labor-hours.