Solum 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, V47Q and K41P, about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $2,449,440 and the company's estimated total direct labor-hours for the year is 54,000.

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 K41P under the activity-based costing system is closest to:
A)$204.82
B)$68.70
C)$182.80
D)$114.10

Question

Solum 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, V47Q and K41P, about which it has provided the following data:  The company's estimated total manufacturing overhead for the year is $2,449,440 and the company's estimated total direct labor-hours for the year is 54,000.

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 K41P under the activity-based costing system is closest to:
A)$204.82 
B)$68.70 
C)$182.80 
D)$114.10

Quizplus · Accepted Answer

The activity rates for each activity cost pool are computed as follows:
 11eaa48f_7b84_f0ef_9e4a_952e6c0aabfa_TB2485_00 
The overhead cost charged to Product K41P is:
 11eaa48f_7b84_f0f0_9e4a_0f6a616a117c_TB2485_00 
Overhead per unit of Product K41P = $1,030,560 $\div$ 15,000 units = $68.70 per unit
 11eaa48f_7b85_1801_9e4a_a7a275392d68_TB2485_00

Solum Manufacturing Corporation Has a Traditional Costing System in Which