Molinas,Inc. ,manufactures and sells two products: Product G1 and Product S8.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company is considering adopting an activity-based costing system with the following activity cost pools,activity measures,and expected activity: If the company allocates all of its overhead based on direct labor-hours using its traditional costing method,the predetermined overhead rate would be closest to:
A)$85.99 per DLH
B)$20.98 per DLH
C)$97.94 per DLH
D)$79.32 per DLH

Question

Molinas,Inc. ,manufactures and sells two products: Product G1 and Product S8.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below:  The company is considering adopting an activity-based costing system with the following activity cost pools,activity measures,and expected activity:  If the company allocates all of its overhead based on direct labor-hours using its traditional costing method,the predetermined overhead rate would be closest to:
A)$85.99 per DLH 
B)$20.98 per DLH 
C)$97.94 per DLH 
D)$79.32 per DLH

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $980,276 ÷ 11,400 DLHs = $85.99 per DLH (rounded)