Scholes 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, L45Y and F91I, about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $3,170,400 and the company's estimated total direct labor-hours for the year is 60,000.

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 unit product cost of product L45Y under the company's traditional costing system is closest to:
A)$54.20
B)$73.27
C)$64.25
D)$31.00

Question

Scholes 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, L45Y and F91I, about which it has provided the following data:  The company's estimated total manufacturing overhead for the year is $3,170,400 and the company's estimated total direct labor-hours for the year is 60,000.

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 unit product cost of product L45Y under the company's traditional costing system is closest to:
A)$54.20 
B)$73.27 
C)$64.25 
D)$31.00

Quizplus · Accepted Answer

Direct labor-hour calculation:
 11eaa48f_7b84_54a8_9e4a_d5b2258985f6_TB2485_00 
Predetermined overhead rate = $3,170,400 $\div$  60,000 direct labor-hours = $52.84 per direct labor-hour
Overhead per unit of product L45Y = $52.84 per direct labor-hour $\times$ 0.8 direct labor-hours per unit = $42.27 per unit
 11eaa48f_7b84_7bb9_9e4a_a39cfd801700_TB2485_00

Scholes Manufacturing Corporation Has a Traditional Costing System in Which