Addy Company Makes Two Products: Product a and Product B

Addy Company makes two products: Product A and Product B. Annual production and sales are 1,700 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 0.3 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:
(Note: 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:

A) $9.15
B) $43.48
C) $84.43
D) $19.08