Addy Company makes two products: Product A and Product B Annual production and sales are 1,500 units of Product A and 1,100 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.30 direct labor hours per unit and Product B requires 0.60 direct labor hours per unit. The total estimated overhead for next period is $92,900. 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. Expected Activity Activity Cost Pool Estimated Overhead Costs Product A Product B Total Activity 1 Activity 2 $33,325 14,620 General Factory 44.955 Total $92,900 1,600 550 2,150 1,500 220 1,720 450 660 1,110 The General factory activity cost pool's costs are allocated on the basis of direct labor hours. The predetermined overhead rate under the traditional costing system is closest to: Round final answer to 2 decimal places. a. $15.50 b. $40.50 c. $83.69 d. $8.50

Addy Company makes two products: Product A and Product B Annual production and sales are 1,500 units of Product A and 1,100 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.30 direct labor hours per unit and Product B requires 0.60 direct labor hours per unit. The total estimated overhead for next period is $92,900. 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. Expected Activity Activity Cost Pool Estimated Overhead Costs Product A Product B Total Activity 1 Activity 2 $33,325 14,620 General Factory 44.955 Total $92,900 1,600 550 2,150 1,500 220 1,720 450 660 1,110 The General factory activity cost pool's costs are allocated on the basis of direct labor hours. The predetermined overhead rate under the traditional costing system is closest to: Round final answer to 2 decimal places. a. $15.50 b. $40.50 c. $83.69 d. $8.50

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 1PB: Bobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven...

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