Addy company has two products: A and B. The annual production and sales of Product A is 2,600 unit and of Product B is 2,000 units. The company has traditionally used direct labor- hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labor-hours per unit and Product B requires 0.6 direct labor-hours per unit. The total estimated overhead for next period is $108,775.The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools - Activity 1, Activity 2, and General Factory - with estimated overhead costs and expected activity as follows: Total Expected Activity Estimated Overhead Costs Product A Product B Product C 1,900 1,500 3,400 2,600 1,100 3,700 1,500 1,740 3,240 Activity 1 $33,611 Activity 2 19,144 General Factory 56,020 Total 108,775 The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to: a. $5.17 b. $29.40 c. $34.58 d. $7.36

Addy company has two products: A and B. The annual production and sales of Product A is 2,600 unit and of Product B is 2,000 units. The company has traditionally used direct labor- hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labor-hours per unit and Product B requires 0.6 direct labor-hours per unit. The total estimated overhead for next period is $108,775.The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools - Activity 1, Activity 2, and General Factory - with estimated overhead costs and expected activity as follows: Total Expected Activity Estimated Overhead Costs Product A Product B Product C 1,900 1,500 3,400 2,600 1,100 3,700 1,500 1,740 3,240 Activity 1 $33,611 Activity 2 19,144 General Factory 56,020 Total 108,775 The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to: a. $5.17 b. $29.40 c. $34.58 d. $7.36

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 6PB: Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen...

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