Question
Russell Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct
Russell 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, Slow and Fast, about which it has provided the following data:
Slow | Fast | ||||||
Direct materials per unit | $ | 14.10 | $ | 43.40 | |||
Direct labor per unit | $ | 3.20 | $ | 25.60 | |||
Direct labor-hours per unit | 0.20 | 1.60 | |||||
Annual production | 38,000 | 23,000 | |||||
The company's estimated total manufacturing overhead for the year is $1,686,700 and the company's estimated total direct labor-hours for the year is 44,400. 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 | Estimated Overhead Cost | |||
Assembling products (DLHs) | $ | 800,000 | ||
Preparing batches (batches) | 402,700 | |||
Product support (product variations) | 484,000 | |||
Total | $ | 1,686,700 | ||
Expected Activity | |||||
Slow | Fast | Total | |||
DLHs | 7,600 | 36,800 | 44,400 | ||
Batches | 1,540 | 1,570 | 3,110 | ||
Product variations | 810 | 780 | 1,590 | ||
The manufacturing overhead that would be applied to a unit of product Slow under the company's traditional costing system is closest to:
Multiple Choice
$21.32.
$3.59.
$13.72.
$7.60.
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