TB MC Qu. 5-69 (Algo) Volume-based costing, overhead application rate: Techno Incorporated

Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital camcorders.

Model	Annual Sales in Units
High F	11,700
Great P	17,700

Techno 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	$ 39.70	$ 27.10
Direct labor	$ 19.30	$ 14.90

Budget factory overhead:
Engineering and Design	2,740	engineering hours	$ 411,000
Quality Control	13,170	inspection hours	338,260
Machinery	34,050	machine hours	610,020
Miscellaneous Overhead	26,730	direct labor hours	132,850
Total			$ 1,492,130

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

	High F	Great P
Engineering and design hours	1,130	1,610
Quality control inspection hours	5,810	7,360
Machine hours	20,450	13,600
Labor hours	12,170	14,560

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

Multiple Choice

• 305 percent of direct labor cost.

• $56.60 per direct labor-hour.

• 73.2 percent of direct labor cost.

• 5,660 percent of direct labor cost.

• 5,582 percent of direct labor cost.