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Serva, Inc., manufactures and sells two products: Product R4 and Product N4. Data concerning the expected production of each product and the expected total direct

Serva, Inc., manufactures and sells two products: Product R4 and Product N4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours
Product R4 800 6.0 4,800
Product N4 300 3.0 900
Total direct labor-hours 5,700

The direct labor rate is $24.70 per DLH. The direct materials cost per unit for each product is given below:

Direct Materials Cost per Unit
Product R4 $202.10
Product N4 $289.90

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

Estimated Expected Activity
Activity Cost Pools Activity Measures Overhead Cost Product R4 Product N4 Total
Labor-related DLHs $86,811 4,800 900 5,700
Machine setups setups 29,000 400 600 1,000
General factory MHs 122,520 3,100 2,900 6,000
$238,331

If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product R4 would be closest to:

$91.38 per unit

$122.52 per unit

$174.00 per unit

$250.86 per unit

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