-3Chang Manufacturing Corporation has a traditional costing system in which it a
ID: 2597405 • Letter: #
Question
-3Chang 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, Plain and Fancy, about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $985,440 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 manufacturing overhead that would be applied to a unit of product Fancy under the activity-based costing system is closest to:
$71.57.
$41.06.
$8.11.
$30.51.
Plain Fancy Direct materials per unit $ 24.50 $ 59.30 Direct labor per unit $ 5.00 $ 25.00 Direct labor-hours per unit 0.20 1.00 Annual production 45,000 15,000Explanation / Answer
Activities and Activity Measures Overhead Expected Activity Activity rate Supporting direct labor 384000 24000 16 Setting up machines 255840 1968 130 Parts administration 345600 864 400 Activities and Activity Measures Fancy Supporting direct labor 240000 =15000*16 Setting up machines 121680 =936*130 Parts administration 96000 =240*400 Total overhead 457680 Units 15000 Overhead per unit 30.51 Option 4 is correct
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