(Appendix 2A) Adelberg Corporation makes two products: Product A and Product B. Annual production and sales are 500 units of Product A and 1,000 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 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756.
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 overhead cost per unit of Product B under the activity-based costing system is closest to:
A) $45.84
B) $7.74
C) $34.38
D) $18.41

Question

(Appendix 2A) Adelberg Corporation makes two products: Product A and Product B. Annual production and sales are 500 units of Product A and 1,000 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 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756.
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 overhead cost per unit of Product B under the activity-based costing system is closest to:
A) $45.84 
B) $7.74 
C) $34.38 
D) $18.41

Quizplus · Accepted Answer

The activity rates for each activity cost pool are computed as follows:
 11ea7761_1989_ddf5_81a5_3b806f09ce19_TB2580_00 The overhead cost charged to Product B is:
 11ea7761_1989_ddf6_81a5_69c4a1716c9b_TB2580_00 Overhead cost per unit of Product B = $18,412 ÷ 1,000 units = $18.41 per unit

(Appendix 2A) Adelberg Corporation Makes Two Products: Product a and Product