Use the information below to answer the following question(s):
Menno Corporation manufactures two products-Tables and Chairs. The annual production and sales of Tables is 2,000 units, while 8,000 units of Chairs are produced and sold. The company has traditionally used direct labour hours to allocate its overhead to products. Tables require 1.0 direct labour hours per unit, while Chairs require 0.5 direct labour hours per unit. The total estimated overhead for the period is $235,000. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:
Expected Activity

-The overhead cost per Chair using the traditional costing system would be closest to
A) $39.17.
B) $21.75.
C) $19.58.
D) $18.01.

Question

Use the information below to answer the following question(s):
Menno Corporation manufactures two products-Tables and Chairs. The annual production and sales of Tables is 2,000 units, while 8,000 units of Chairs are produced and sold. The company has traditionally used direct labour hours to allocate its overhead to products. Tables require 1.0 direct labour hours per unit, while Chairs require 0.5 direct labour hours per unit. The total estimated overhead for the period is $235,000. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:
Expected Activity
 
-The overhead cost per Chair using the traditional costing system would be closest to
A) $39.17. 
B) $21.75. 
C) $19.58. 
D) $18.01.

Quizplus · Accepted Answer

C) $235,000 / 6,000 hrs = 39.17
0.5 hours × 39.17 per hour = 19.58

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