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Student name:__________
1) Werger 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, W82R and L48S, about which it has
provided the following data:
W82R L48S
Direct materials per unit $ 20.60 $ 60.40
Direct labor per unit $ 16.80 $ 58.20
Direct labor-hours per unit 0.70 2.40
Annual production (units) 32,100 17,000
The company’s estimated total manufacturing overhead for the year is $2,940,670 and the
company’s estimated total direct labor-hours for the year is 63,270. 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:
Activities and Activity Measures Estimated Overhead Cost
Supporting direct labor (direct labor–hours) $ 569,430
Setting up machines (setups) 775,800
Parts administration (part types) 1,595,440
Total $ 2,940,670
Activities W82R L48S Total
Supporting direct labor 22,470 40,800 63,270
Setting up machines 870 3,440 4,310
Parts administration 2,340 1,580 3,920
Required:
a. Determine the unit product cost of each of the company’s two products under the traditional
costing system.
b. Determine the unit product cost of each of the company’s two products under activity-based
costing system.
(For all requirements, round your intermediate calculations and final answers to 2
decimal places.)
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2) Bullie 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, D31X and U75X, about which it has
provided the following data:
D31X U75X
Direct materials per unit $ 29.20 $ 47.40
Direct labor per unit $ 1.10 $ 23.10
Direct labor-hours per unit 0.10 2.10
Annual production (units) 35,000 15,000
The company’s estimated total manufacturing overhead for the year is $1,147,650 and the
company’s estimated total direct labor-hours for the year is 35,000.
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:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (direct labor-hours) $ 140,000
Preparing batches (batches) 241,150
Axial milling (machine-hours) 766,500
Total $ 1,147,650
D31X U75X Total
Assembling products 3,500 31,500 35,000
Preparing batches 560 1,295 1,855
Axial milling 1,540 1,015 2,555
Required:
a. Determine the manufacturing overhead cost per unit of each of the company’s two products
under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company’s two products
under activity-based costing system.
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3) Torri 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, B40W and C63J, about which it has
provided the following data:
B40W C63J
Direct materials per unit $ 34.90 $ 63.70
Direct labor per unit $ 20.80 $ 62.40
Direct labor-hours per unit 0.80 2.40
Annual production (units) 35,000 15,000
The company’s estimated total manufacturing overhead for the year is $2,656,000 and the
company’s estimated total direct labor-hours for the year is 64,000.
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:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (direct labor-hours) $ 1,216,000
Preparing batches (batches) 480,000
Milling (machine-hours) 960,000
Total $ 2,656,000
Activities B40W C63J Total
Assembling products 28,000 36,000 64,000
Preparing batches 2,304 2,496 4,800
Milling 1,088 2,112 3,200
Required:
a. Determine the unit product cost of each of the company’s two products under the traditional
costing system.
b. Determine the unit product cost of each of the company’s two products under activity-based
costing system.
4) Cabigas Corporation manufactures two products, Product C and Product D. The company
estimated it would incur $167,140 in manufacturing overhead costs during the current period.
Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning
the current period’s operations appear below:
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Product C Product D
Estimated volume 2,000 units 2,700 units
Direct labor-hours per unit 2.00 hours 0.80 hour
Direct materials cost per unit $ 21.50 $ 24.10
Direct labor cost per unit $ 24.00 $ 9.60
Required:
a. Compute the predetermined overhead rate under the current method, and determine the unit
product cost of each product for the current year.
b. The company is considering using an activity-based costing system to compute unit product
costs for external financial reports instead of its traditional system based on direct labor-hours.
The activity-based costing system would use three activity cost pools. Data relating to these
activities for the current period are given below:
Activity Cost Pool Estimated Overhead Costs Expected Activity
Product C Product D Total
Machine setups $ 13,630 130 160 290
Purchase orders 85,750 750 1,000 1,750
General factory 67,760 4,000 2,160 6,160
$ 167,140
Determine the unit product cost of each product for the current period using the activity-based
costing approach. General factory overhead is allocated based on direct labor-hours.
5) Welk 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, H16Z and P25P, about which it has
provided the following data:
H16Z P25P
Direct materials per unit $ 10.20 $ 50.50
Direct labor per unit $ 8.40 $ 25.20
Direct labor-hours per unit 0.40 1.20
Annual production (units) 30,000 10,000
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The company’s estimated total manufacturing overhead for the year is $1,464,480 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:
Activities and Activity Measures Estimated Overhead Cost
Supporting direct labor (direct labor–hours) $ 552,000
Setting up machines (setups) 132,480
Parts administration (part types) 780,000
Total $ 1,464,480
H16Z P25P Total
Supporting direct labor 12,000 12,000 24,000
Setting up machines 864 240 1,104
Parts administration 600 960 1,560
Required:
a. Determine the manufacturing overhead cost per unit of each of the company’s two products
under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company’s two products
under activity-based costing system.
6) Werger 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, W82R and L48S, about which it has
provided the following data:
W82R L48S
Direct materials per unit $ 11.50 $ 62.90
Direct labor per unit $ 2.00 $ 13.00
Direct labor-hours per unit 0.20 1.30
Annual production (units) 45,000 10,000
The company’s estimated total manufacturing overhead for the year is $1,521,960 and the
company’s estimated total direct labor-hours for the year is 22,000. 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:
Activities and Activity Measures Estimated Overhead Cost
Supporting direct labor (direct labor–hours) $ 352,000
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Setting up machines (setups) 201,960
Parts administration (part types) 968,000
Total $ 1,521,960
Activities W82R L48S Total
Supporting direct labor 9,000 13,000 22,000
Setting up machines 814 374 1,188
Parts administration 924 1,012 1,936
Required:
a. Determine the unit product cost of each of the company’s two products under the traditional
costing system.
b. Determine the unit product cost of each of the company’s two products under activity-based
costing system.
7) Feauto 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, I63E and E76I, about which it has provided
the following data:
I63E E76I
Direct materials per unit $ 20.20 $ 60.60
Direct labor per unit $ 14.30 $ 42.90
Direct labor-hours per unit 1.10 3.30
Annual production (units) 45,000 15,000
The company’s estimated total manufacturing overhead for the year is $2,928,600 and the
company’s estimated total direct labor-hours for the year is 99,000.
The company is considering using a form of activity-based costing to determine its unit product
costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (direct labor-hours) $ 1,980,000
Preparing batches (batches) 204,600
Product support (product variations) 744,000
Total $ 2,928,600
Expected Activity
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I63E E76I Total
Direct labor-hours 49,500 49,500 99,000
Batches 1,290 680 1,970
Product variations 2,580 1,360 3,940
The manufacturing overhead that would be applied to a unit of product I63E under the
company’s traditional costing system is closest to:
A) $29.58
B) $97.62
C) $65.08
D) $32.54
8) Feauto 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, I63E and E76I, about which it has provided
the following data:
I63E E76I
Direct materials per unit $ 19.90 $ 54.40
Direct labor per unit $ 12.00 $ 31.50
Direct labor-hours per unit 0.80 2.10
Annual production (units) 30,000 10,000
The company’s estimated total manufacturing overhead for the year is $2,063,250 and the
company’s estimated total direct labor-hours for the year is 45,000.
The company is considering using a form of activity-based costing to determine its unit
product costs for external reports. Data for this proposed activity-based costing system appear
below:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (direct labor-hours) $ 720,000
Preparing batches (batches) 263,250
Product support (product variations) 1,080,000
Total $ 2,063,250
Expected Activity
I63E E76I Total
Direct labor-hours 24,000 21,000 45,000
Batches 1,080 675 1,755
Product variations 2,115 1,485 3,600
The manufacturing overhead that would be applied to a unit of product I63E under the
company’s traditional costing system is closest to:
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A) $12.80
B) $39.35
C) $76.03
D) $36.68
9) Feauto 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, I63E and E76I, about which it has provided
the following data:
I63E E76I
Direct materials per unit $ 20.70 $ 62.10
Direct labor per unit $ 12.20 $ 36.60
Direct labor-hours per unit 0.80 2.40
Annual production (units) 57,000 19,000
The company’s estimated total manufacturing overhead for the year is $1,943,700 and the
company’s estimated total direct labor-hours for the year is 91,200.
The company is considering using a form of activity-based costing to determine its unit
product costs for external reports. Data for this proposed activity-based costing system appear
below:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (direct labor-hours) $ 912,000
Preparing batches (batches) 199,100
Product support (product variations) 832,600
Total $ 1,943,700
Expected Activity
I63E E76I Total
Direct labor-hours 45,600 45,600 91,200
Batches 1,270 790 2,060
Product variations 2,540 1,580 4,120
The manufacturing overhead that would be applied to a unit of product E76I under the activity-
based costing system is closest to:
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A) $44.82
B) $21.31
C) $102.30
D) $18.68
10) Feauto 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, I63E and E76I, about which it has provided
the following data:
I63E E76I
Direct materials per unit $ 19.90 $ 54.40
Direct labor per unit $ 12.00 $ 31.50
Direct labor-hours per unit 0.80 2.10
Annual production (units) 30,000 10,000
The company’s estimated total manufacturing overhead for the year is $2,063,250 and the
company’s estimated total direct labor-hours for the year is 45,000.
The company is considering using a form of activity-based costing to determine its unit product
costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (direct labor-hours) $ 720,000
Preparing batches (batches) 263,250
Product support (product variations) 1,080,000
Total $ 2,063,250
Expected Activity
I63E E76I Total
Direct labor-hours 24,000 21,000 45,000
Batches 1,080 675 1,755
Product variations 2,115 1,485 3,600
The manufacturing overhead that would be applied to a unit of product E76I under the activity-
based costing system is closest to:
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A) $88.28
B) $96.29
C) $184.57
D) $10.13
11) Coudriet 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, P93S and N40S, about which it has
provided the following data:
P93S N40S
Direct materials per unit $ 21.90 $ 54.80
Direct labor per unit $ 8.80 $ 13.20
Direct labor-hours per unit 0.80 1.20
Annual production (units) 35,000 15,000
The company’s estimated total manufacturing overhead for the year is $2,172,580 and the
company’s estimated total direct labor-hours for the year is 46,000.
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:
Activities and Activity Measures Estimated Overhead Cost
Direct labor support (direct labor-hours) $ 552,000
Setting up machines (setups) 419,980
Part administration (part types) 1,200,600
Total $ 2,172,580
Expected Activity
P93S N40S Total
Direct labor-hours 28,000 18,000 46,000
Setups 2,162 1,656 3,818
Part types 1,886 2,116 4,002
The unit product cost of product P93S under the company’s traditional costing system is closest
to:
A) $68.48
B) $63.26
C) $30.70
D) $40.30
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12) Coudriet 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, P93S and N40S, about which it has
provided the following data:
P93S N40S
Direct materials per unit $ 21.90 $ 54.80
Direct labor per unit $ 8.80 $ 13.20
Direct labor-hours per unit 0.80 1.20
Annual production (units) 35,000 15,000
The company’s estimated total manufacturing overhead for the year is $2,172,580 and the
company’s estimated total direct labor-hours for the year is 46,000.
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:
Activities and Activity Measures Estimated Overhead Cost
Direct labor support (direct labor-hours) $ 552,000
Setting up machines (setups) 419,980
Part administration (part types) 1,200,600
Total $ 2,172,580
Expected Activity
P93S N40S Total
Direct labor-hours 28,000 18,000 46,000
Setups 2,162 1,656 3,818
Part types 1,886 2,116 4,002
The unit product cost of product N40S under the activity-based costing system is closest to:
A) $68.00
B) $68.86
C) $124.68
D) $136.86
13) 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:
R78S N32Y
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Direct materials per unit $ 27.20 $ 54.70
Direct labor per unit $ 8.80 $ 22.00
Direct labor-hours per unit 0.4 1.0
Annual production (units) 35,000 10,000
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:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (direct labor-hours) $ 672,000
Preparing batches (batches) 255,840
Product support (product variations) 499,200
Total $ 1,427,040
Expected Activity
R78S N32Y Total
Direct labor-hours 14,000 10,000 24,000
Batches 816 1,152 1,968
Product variations 840 408 1,248
The unit product cost of product R78S under the company’s traditional costing system is closest
to:
A) $36.00
B) $59.83
C) $47.20
D) $59.78
14) 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:
R78S N32Y
Direct materials per unit $ 27.20 $ 54.70
Direct labor per unit $ 8.80 $ 22.00
Direct labor-hours per unit 0.4 1.0
Annual production (units) 35,000 10,000
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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:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (direct labor-hours) $ 672,000
Preparing batches (batches) 255,840
Product support (product variations) 499,200
Total $ 1,427,040
Expected Activity
R78S N32Y Total
Direct labor-hours 14,000 10,000 24,000
Batches 816 1,152 1,968
Product variations 840 408 1,248
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
15) Adelberg Corporation makes two products: Product A and Product B. Annual production
and sales are 500 units of Product A and 1,000 units of Product B. The company has traditionally
used direct labor-hours as the basis for applying all manufacturing overhead to products. Product
A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit.
The total estimated overhead for next period is $68,756.
The company is considering switching to an activity-based costing system for the purpose of
computing unit product costs for external reports. The new activity-based costing system would
have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with
estimated overhead costs and expected activity as follows:
Activity Cost Pool Estimated Overhead Costs Expected Activity
Product A Product B Total
Activity 1 $ 31,031 1,000 300 1,300
Activity 2 22,249 1,600 300 1,900
General Factory 15,476 200 200 400
Total $ 68,756
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(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct labor-
hours.)
The predetermined overhead rate under the traditional costing system is closest to:
A) $11.71
B) $38.69
C) $171.89
D) $23.87
16) Adelberg Corporation makes two products: Product A and Product B. Annual production
and sales are 500 units of Product A and 1,000 units of Product B. The company has traditionally
used direct labor-hours as the basis for applying all manufacturing overhead to products. Product
A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit.
The total estimated overhead for next period is $68,756.
The company is considering switching to an activity-based costing system for the purpose of
computing unit product costs for external reports. The new activity-based costing system would
have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with
estimated overhead costs and expected activity as follows:
Activity Cost Pool Estimated Overhead Costs Expected Activity
Product A Product B Total
Activity 1 $ 31,031 1,000 300 1,300
Activity 2 22,249 1,600 300 1,900
General Factory 15,476 200 200 400
Total $ 68,756
(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct labor-
hours.)
The overhead cost per unit of Product B under the traditional costing system is closest to:
A) $2.34
B) $7.74
C) $4.77
D) $34.38
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17) Adelberg Corporation makes two products: Product A and Product B. Annual production
and sales are 500 units of Product A and 1,000 units of Product B. The company has traditionally
used direct labor-hours as the basis for applying all manufacturing overhead to products. Product
A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit.
The total estimated overhead for next period is $68,756.
The company is considering switching to an activity-based costing system for the purpose of
computing unit product costs for external reports. The new activity-based costing system would
have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with
estimated overhead costs and expected activity as follows:
Activity Cost Pool Estimated Overhead Costs Expected Activity
Product A Product B Total
Activity 1 $ 31,031 1,000 300 1,300
Activity 2 22,249 1,600 300 1,900
General Factory 15,476 200 200 400
Total $ 68,756
(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct labor-
hours.)
The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based
costing system is closest to:
A) $13.91
B) $11.71
C) $74.16
D) $36.19
18) Adelberg Corporation makes two products: Product A and Product B. Annual production
and sales are 2,500 units of Product A and 1,500 units of Product B. The company has
traditionally used direct labor-hours as the basis for applying all manufacturing overhead to
products. Product A requires 0.2 direct labor-hours per unit and Product B requires 0.2 direct
labor-hours per unit. The total estimated overhead for next period is $114,550.
The company is considering switching to an activity-based costing system for the purpose of
computing unit product costs for external reports. The new activity-based costing system would
have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with
estimated overhead costs and expected activity as follows:
Activity Cost Pool Estimated Overhead Costs Expected Activity
Product A Product B Total
Activity 1 $ 51,660 1,400 700 2,100
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Activity 2 31,290 1,400 700 2,100
General Factory 31,600 500 300 800
Total $ 114,550
(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct labor-
hours.) The overhead cost per unit of Product B under the activity-based costing system is
closest to:
A) $39.50
B) $15.80
C) $18.80
D) $26.33
19) Adelberg Corporation makes two products: Product A and Product B. Annual production
and sales are 500 units of Product A and 1,000 units of Product B. The company has traditionally
used direct labor-hours as the basis for applying all manufacturing overhead to products. Product
A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit.
The total estimated overhead for next period is $68,756.
The company is considering switching to an activity-based costing system for the purpose of
computing unit product costs for external reports. The new activity-based costing system would
have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with
estimated overhead costs and expected activity as follows:
Activity Cost Pool Estimated Overhead Costs Expected Activity
Product A Product B Total
Activity 1 $ 31,031 1,000 300 1,300
Activity 2 22,249 1,600 300 1,900
General Factory 15,476 200 200 400
Total $ 68,756
(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct labor-
hours.)
The overhead cost per unit of Product B under the activity-based costing system is closest to:
A) $45.84
B) $7.74
C) $34.38
D) $18.41
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20) Njombe Corporation manufactures a variety of products. In the past, Njombe has been
using a traditional costing system in which the predetermined overhead rate was 150% of direct
labor cost. Selling prices had been set by multiplying total product cost by 200%. Sensing that
this system was distorting costs and selling prices, Njombe has decided to switch to an activity-
based costing system for manufacturing overhead costs that uses the three activity cost pools
listed below. Selling prices are still to be set at 200% of unit product cost under the new system.
Information on these cost pools for next year are as follows:
Activity Cost Pool Activity Measure Estimated Activity Estimated
Overhead Cost
Machine Setups Number of setups 400 $ 150,000
Quality Control Number of inspections 1,500 $ 180,000
Other Overhead Machine hours 30,000 $ 480,000
Information (on a per unit basis) related to three popular products at Njombe are as follows:
Model #19 Model #36 Model #58
Direct material cost $ 400 $ 540 $ 310
Direct labor cost $ 810 $ 600 $ 220
Number of setups 2 3 1
Number of inspections 1 3 1
Number of machine hours 4 8 10
Under the traditional costing system, what would be the selling price of one unit of Model #36?
A) $2,536
B) $2,712
C) $4,080
D) $5,506
21) Njombe Corporation manufactures a variety of products. In the past, Njombe has been
using a traditional costing system in which the predetermined overhead rate was 150% of direct
labor cost. Selling prices had been set by multiplying total product cost by 200%. Sensing that
this system was distorting costs and selling prices, Njombe has decided to switch to an activity-
based costing system for manufacturing overhead costs that uses the three activity cost pools
listed below. Selling prices are still to be set at 200% of unit product cost under the new system.
Information on these cost pools for next year are as follows:
Activity Cost Pool Activity Measure Estimated Activity Estimated
Overhead Cost
Machine Setups Number of setups 400 $ 150,000
Quality Control Number of inspections 1,500 $ 180,000
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Other Overhead Machine hours 30,000 $ 480,000
Information (on a per unit basis) related to three popular products at Njombe are as follows:
Model #19 Model #36 Model #58
Direct material cost $ 400 $ 540 $ 310
Direct labor cost $ 810 $ 600 $ 220
Number of setups 2 3 1
Number of inspections 1 3 1
Number of machine hours 4 8 10
Under the activity-based costing system, what would be the selling price of one unit of Model
#36?
A) $2,536
B) $2,712
C) $4,080
D) $5,506
22) Njombe Corporation manufactures a variety of products. In the past, Njombe has been
using a traditional costing system in which the predetermined overhead rate was 150% of direct
labor cost. Selling prices had been set by multiplying total product cost by 200%. Sensing that
this system was distorting costs and selling prices, Njombe has decided to switch to an activity-
based costing system for manufacturing overhead costs that uses the three activity cost pools
listed below. Selling prices are still to be set at 200% of unit product cost under the new system.
Information on these cost pools for next year are as follows:
Activity Cost Pool Activity Measure Estimated Activity Estimated
Overhead Cost
Machine Setups Number of setups 400 $ 150,000
Quality Control Number of inspections 1,500 $ 180,000
Other Overhead Machine hours 30,000 $ 480,000
Information (on a per unit basis) related to three popular products at Njombe are as follows:
Model #19 Model #36 Model #58
Direct material cost $ 400 $ 540 $ 310
Direct labor cost $ 810 $ 600 $ 220
Number of setups 2 3 1
Number of inspections 1 3 1
Number of machine hours 4 8 10
In comparing the traditional system with the activity-based costing system, which of Njombe’s
Models had higher unit product costs under the traditional system?
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A) #19
B) #58
C) #19 and #58
D) #36 and #58
23) Look 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, N06D and M09K, about which it has
provided the following data:
N06D M09K
Direct materials per unit $ 31.80 $ 63.30
Direct labor per unit $ 10.00 $ 27.00
Direct labor-hours per unit 0.20 1.00
Annual production (units) 45,600 21,100
The company’s estimated total manufacturing overhead for the year is $1,632,986 and the
company’s estimated total direct labor-hours for the year is 30,220.
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:
Activities and Activity Measures Estimated Overhead Cost
Supporting direct labor (direct labor–hours) $ 695,060
Setting up machines (setups) 551,702
Parts administration (part types) 386,224
Total $ 1,632,986
Expected Activity
N06D M09K Total
Direct labor-hours 9,120 21,100 30,220
Setups 1,450 1,024 2,474
Part types 677 279 956
The manufacturing overhead that would be applied to a unit of product N06D under the
company’s traditional costing system is closest to: (Round your intermediate calculations to 2
decimal places.)
A) $22.34
B) $5.80
C) $10.81
D) $14.33
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24) Look 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, N06D and M09K, about which it has
provided the following data:
N06D M09K
Direct materials per unit $ 17.70 $ 62.50
Direct labor per unit $ 5.00 $ 16.00
Direct labor-hours per unit 0.50 1.60
Annual production (units) 40,000 15,000
The company’s estimated total manufacturing overhead for the year is $2,532,200 and the
company’s estimated total direct labor-hours for the year is 44,000.
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:
Activities and Activity Measures Estimated Overhead Cost
Supporting direct labor (direct labor–hours) $ 880,000
Setting up machines (setups) 376,200
Parts administration (part types) 1,276,000
Total $ 2,532,200
Expected Activity
N06D M09K Total
Direct labor-hours 20,000 24,000 44,000
Setups 1,408 1,100 2,508
Part types 1,540 1,012 2,552
The manufacturing overhead that would be applied to a unit of product N06D under the
company’s traditional costing system is closest to:
A) $28.78
B) $10.00
C) $63.31
D) $34.53
25) Look 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, N06D and M09K, about which it has
provided the following data:
N06D M09K
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Direct materials per unit $ 30.50 $ 65.30
Direct labor per unit $ 14.00 $ 32.00
Direct labor-hours per unit 0.20 1.00
Annual production (units) 54,900 22,800
The company’s estimated total manufacturing overhead for the year is $1,715,474 and the
company’s estimated total direct labor-hours for the year is 33,780.
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:
Activities and Activity Measures Estimated Overhead Cost
Supporting direct labor (direct labor–hours) $ 709,380
Setting up machines (setups) 637,994
Parts administration (part types) 368,100
Total $ 1,715,474
Expected Activity
N06D M09K Total
Direct labor-hours 10,980 22,800 33,780
Setups 1,780 1,006 2,786
Part types 647 253 900
The manufacturing overhead that would be applied to a unit of product M09K under the activity-
based costing system is closest to:
A) $13.24
B) $46.19
C) $35.64
D) $76.70
26) Look 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, N06D and M09K, about which it has
provided the following data:
N06D M09K
Direct materials per unit $ 17.70 $ 62.50
Direct labor per unit $ 5.00 $ 16.00
Direct labor-hours per unit 0.50 1.60
Annual production (units) 40,000 15,000
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The company’s estimated total manufacturing overhead for the year is $2,532,200 and the
company’s estimated total direct labor-hours for the year is 44,000.
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:
Activities and Activity Measures Estimated Overhead Cost
Supporting direct labor (direct labor–hours) $ 880,000
Setting up machines (setups) 376,200
Parts administration (part types) 1,276,000
Total $ 2,532,200
Expected Activity
N06D M09K Total
Direct labor-hours 20,000 24,000 44,000
Setups 1,408 1,100 2,508
Part types 1,540 1,012 2,552
The manufacturing overhead that would be applied to a unit of product M09K under the activity-
based costing system is closest to:
A) $76.73
B) $92.08
C) $11.00
D) $168.81
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Answer Key
Test name: chapter 2A