Acton Company has two products: A and B. The annual productionand sales of Produ
ID: 2444343 • Letter: A
Question
Acton Company has two products: A and B. The annual productionand sales of Product A is 800 units and of Product B is 500 units.The company has traditionally used direct labor-hours as the basisfor applying all manufacturing overhead to products. Product Arequires 0.3 direct labor hours per unit and Product B requires 0.2direct labor hours per unit. The total estimated overhead for nextperiod is $92,023. The company is considering switching to anactivity-based costing system for the purpose of computing unitproduct costs for external reports. The new activity-based costingsystem would have three overhead activity cost pools--Activity 1,Activity 2, and General Factory--with estimated overhead costs andexpected activity as follows:
Activity Cost Pool
Estimated Overhead Cost
Expected Activity
Product A
Product B
Total
Activity 1
$14,487
500
600
1,100
Activity 2
$64,800
2,500
500
3,000
General Factory
$12,736
240
100
340
Total
$92,023
Activity Cost Pool
Estimated Overhead Cost
Expected Activity
Explanation / Answer
Units of product A 600 Units of product B 500 Total Units produced 1100 Estimated Overhead Cost 14487 The pre determined overhead rate is closest to 14487 / 1100 The pre determined overheadrate is closest to 13.17
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