The overhead cost per unit of Product B under the traditional costing system is closest to: $50.66 $5.49 $26.09 $11.45

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Addy Company has two products: A and B. The annual production and sales of Product A is 1,700 units and of Product B is 1,100 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 $98,785.

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:

Activity Cost pool Estimated Overhead Costs Expected Product A Expected Product B Total
Activity 1 $30,528 1,000 600 1,600
Activity 2 $17,385 1,700 200 1,900
General Factory  $50,872 510 660 1,170
Total $98,785      

Note: The general factory activity cost pool's cost s are allocated on the basis of direct labor-hours

The overhead cost per unit of Product B under the traditional costing system is closest to:

$50.66

$5.49

$26.09

$11.45

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