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Adelberg Company has two products: A and B. The annual production and sales of Product A Is 2,550 units and of Product B is 1,950 units. The company has traditionally used direct labor-hours as the basis for applytng all manufacturing overhead to products. Product A requires 0.5 direct labor-hours per unit and Product B requires 0.8 direct labor-hours per unit. The total estimated overhead for next perlod is $108,200 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 Order Size- with estimated overhead costs and expected activity as follows: Estimated Expected Activity Overhead Activity Cost Pools Activity 1 Activity 2 Order Size Costs Product A Product B Total $ 33,434 1,850 2,550 1,450 1,050 3,300 19,043 55,723 3,600 1,275 1,560 2,835 Total $ 108,200

Adelberg Company has two products: A and B. The annual production and sales of Product A Is 2,550 units and of Product B is 1,950 units. The company has traditionally used direct labor-hours as the basis for applytng all manufacturing overhead to products. Product A requires 0.5 direct labor-hours per unit and Product B requires 0.8 direct labor-hours per unit. The total estimated overhead for next perlod is $108,200 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 Order Size- with estimated overhead costs and expected activity as follows: Estimated Expected Activity Overhead Activity Cost Pools Activity 1 Activity 2 Order Size Costs Product A Product B Total $ 33,434 1,850 2,550 1,450 1,050 3,300 19,043 55,723 3,600 1,275 1,560 2,835 Total $ 108,200

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Adelberg Company has two products: A and B. The annual production and sales of Product A is 2.550 units and of Product B Is 1.950 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.5 direct labor-hours per unit and Product B requires 0.8 direct labor-hours per unit. The total estimated overhead for next perlod is $108,200. 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 Order Size- with estimated overhead costs and expected activity as follows: Estimated Expected Activity Overhead Activity Cost Pools Activity 1 Activity 2 Costs Product A Product B $ 33,434 Total 3, 300 1,850 2,550 1,275 1,450 19,043 1,050 3,600 Order Size 55,723 $ 108, 200 1,560 2,835 Total (Note: The Order Size 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: Multiple Choice $5.29 per DLH $19.66 per DLH $3817 per DLH $10.13 per DLH
Transcribed Image Text:Adelberg Company has two products: A and B. The annual production and sales of Product A is 2.550 units and of Product B Is 1.950 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.5 direct labor-hours per unit and Product B requires 0.8 direct labor-hours per unit. The total estimated overhead for next perlod is $108,200. 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 Order Size- with estimated overhead costs and expected activity as follows: Estimated Expected Activity Overhead Activity Cost Pools Activity 1 Activity 2 Costs Product A Product B $ 33,434 Total 3, 300 1,850 2,550 1,275 1,450 19,043 1,050 3,600 Order Size 55,723 $ 108, 200 1,560 2,835 Total (Note: The Order Size 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: Multiple Choice $5.29 per DLH $19.66 per DLH $3817 per DLH $10.13 per DLH
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