(Appendix 2A) Poma 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, R78S and N32Y, about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,427,040 and the company's estimated total direct labor-hours for the year is 24,000.
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 N32Y under the activity-based costing system is closest to:
A) $136.00
B) $76.70
C) $59.30
D) $136.16

Question

(Appendix 2A) Poma 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, R78S and N32Y, about which it has provided the following data:
  The company's estimated total manufacturing overhead for the year is $1,427,040 and the company's estimated total direct labor-hours for the year is 24,000.
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 N32Y under the activity-based costing system is closest to:
A) $136.00 
B) $76.70 
C) $59.30 
D) $136.16

Quizplus · Accepted Answer

The activity rates for each activity cost pool are computed as follows:
 11ea7761_1988_f38f_81a5_8daa75d30fc7_TB2580_00 The overhead cost charged to Product N32Y is:
 11ea7761_1989_1aa0_81a5_c5119742d078_TB2580_00 Overhead per unit of Product N32Y = $592,960 ÷ 10,000 units = $59.30 per unit
 11ea7761_1989_1aa1_81a5_7bd137296021_TB2580_00

(Appendix 2A) Poma Manufacturing Corporation Has a Traditional Costing System