Latting Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, T73C and R28K, about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $1,526,700 and the company's estimated total direct labor-hours for the year is 30,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

-The manufacturing overhead that would be applied to a unit of product R28K under the activity-based costing system is closest to:
A)$81.42
B)$65.02
C)$146.44
D)$12.22

Question

Latting Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, T73C and R28K, about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $1,526,700 and the company's estimated total direct labor-hours for the year is 30,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
 
-The manufacturing overhead that would be applied to a unit of product R28K under the activity-based costing system is closest to:
A)$81.42 
B)$65.02 
C)$146.44 
D)$12.22

Quizplus · Accepted Answer

The activity rates for each activity cost pool are computed as follows:
 11eaa48f_7b84_2d96_9e4a_b784a8a0d720_TB2485_00 
The overhead cost charged to Product R28K is:
 11eaa48f_7b84_2d97_9e4a_01d5bab9cd36_TB2485_00 
Manufacturing overhead applied to a unit of product R28K = $975,300 $\div$ 15,000 units = $65.02 per unit

Latting Manufacturing Corporation Has a Traditional Costing System in Which