Sampaga,Inc. ,manufactures and sells two products: Product S6 and Product U3.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $20.90 per DLH.The direct materials cost per unit is $145.30 for Product S6 and $221.50 for Product U3. 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 overhead assigned to each unit of Product U3 would be closest to:
A)$482.85 per unit
B)$883.35 per unit
C)$252.36 per unit
D)$233.10 per unit

Question

Sampaga,Inc. ,manufactures and sells two products: Product S6 and Product U3.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below:  The direct labor rate is $20.90 per DLH.The direct materials cost per unit is $145.30 for Product S6 and $221.50 for Product U3. 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 overhead assigned to each unit of Product U3 would be closest to:
A)$482.85 per unit 
B)$883.35 per unit 
C)$252.36 per unit 
D)$233.10 per unit

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $520,424 ÷ 9,700 DLHs = $53.65 per DLH (rounded)
Product U3: 9.0 DLHs × $53.65 per DLH = $482.85