3-543
136.
Adams Company has two products: A and B. The annual production and sales of Product A
is 500 units and of Product B is 900 units. The company has traditionally used direct labor-
hours (DLHs) as the basis for applying all manufacturing overhead to products. Product A
requires 0.4 direct labor-hours per unit and Product B requires 0.5 direct labor-hours per
unit. The total estimated overhead for next period is $67,522.
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 Pools
Estimated Overhead Costs
Product A
Product B
Total
Activity 1
$6,915
300
200
500
Activity 2
24,948
2,100
700
2,800
General Factory
35,659
200
450
650
Total
$67,522
(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:
3-545
3-546
137.
Adams Company has two products: A and B. The annual production and sales of Product A
is 500 units and of Product B is 900 units. The company has traditionally used direct labor-
hours (DLHs) as the basis for applying all manufacturing overhead to products. Product A
requires 0.4 direct labor-hours per unit and Product B requires 0.5 direct labor-hours per
unit. The total estimated overhead for next period is $67,522.
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 Pools
Estimated Overhead Costs
Product A
Product B
Total
Activity 1
$6,915
300
200
500
Activity 2
24,948
2,100
700
2,800
General Factory
35,659
200
450
650
Total
$67,522
(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 A under the traditional costing system is closest
to:
3-547
3-548
138.
Adams Company has two products: A and B. The annual production and sales of Product A
is 500 units and of Product B is 900 units. The company has traditionally used direct labor-
hours (DLHs) as the basis for applying all manufacturing overhead to products. Product A
requires 0.4 direct labor-hours per unit and Product B requires 0.5 direct labor-hours per
unit. The total estimated overhead for next period is $67,522.
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 Pools
Estimated Overhead Costs
Product A
Product B
Total
Activity 1
$6,915
300
200
500
Activity 2
24,948
2,100
700
2,800
General Factory
35,659
200
450
650
Total
$67,522
(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 1 under the activity-based
costing system is closest to:
3-549
3-550
139.
Adams Company has two products: A and B. The annual production and sales of Product A
is 500 units and of Product B is 900 units. The company has traditionally used direct labor-
hours (DLHs) as the basis for applying all manufacturing overhead to products. Product A
requires 0.4 direct labor-hours per unit and Product B requires 0.5 direct labor-hours per
unit. The total estimated overhead for next period is $67,522.
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 Pools
Estimated Overhead Costs
Product A
Product B
Total
Activity 1
$6,915
300
200
500
Activity 2
24,948
2,100
700
2,800
General Factory
35,659
200
450
650
Total
$67,522
(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 A under the activity-based costing system is
closest to:
3-551
3-552
140.
Minon, Inc., manufactures and sells two products: Product J1 and Product E7. Data
concerning the expected production of each product and the expected total direct labor-
hours (DLHs) required to produce that output appear below:
Expected
Production
Direct Labor-Hours Per
Unit
Total Direct Labor-
Hours
Product J1
800
7.0
5,600
Product E7
700
8.0
5,600
Total direct labor-
hours
11,200
The direct labor rate is $19.90 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product J1
$268.20
Product E7
$165.80
The company is considering adopting an activity-based costing system with the following
activity cost pools, activity measures, and expected activity:
Expected Activity
Activity
Cost
Pools
Activity
Measures
Estimated
Overhead
Cost
Product
J1
Product
E7
Total
Labor-
related
DLHs
$372,512
5,600
5,600
11,200
Machine
setups
setups
41,670
300
200
500
General
MHs
404,504
3,000
2,900
5,900
3-553
factory
$818,686
If the company allocates all of its overhead based on direct labor-hours using its
traditional costing method, the predetermined overhead rate would be closest to:
3-554
141.
Minon, Inc., manufactures and sells two products: Product J1 and Product E7. Data
concerning the expected production of each product and the expected total direct labor-
hours (DLHs) required to produce that output appear below:
Expected
Production
Direct Labor-Hours Per
Unit
Total Direct Labor-
Hours
Product J1
800
7.0
5,600
Product E7
700
8.0
5,600
Total direct labor-
hours
11,200
The direct labor rate is $19.90 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product J1
$268.20
Product E7
$165.80
The company is considering adopting an activity-based costing system with the following
activity cost pools, activity measures, and expected activity:
Expected Activity
Activity
Cost
Pools
Activity
Measures
Estimated
Overhead
Cost
Product
J1
Product
E7
Total
Labor-
related
DLHs
$372,512
5,600
5,600
11,200
3-555
Machine
setups
setups
41,670
300
200
500
General
factory
MHs
404,504
3,000
2,900
5,900
$818,686
If the company allocates all of its overhead based on direct labor-hours using its
traditional costing method, the overhead assigned to each unit of Product J1 would be
closest to:
3-556
142.
Minon, Inc., manufactures and sells two products: Product J1 and Product E7. Data
concerning the expected production of each product and the expected total direct labor-
hours (DLHs) required to produce that output appear below:
Expected
Production
Direct Labor-Hours Per
Unit
Total Direct Labor-
Hours
Product J1
800
7.0
5,600
Product E7
700
8.0
5,600
Total direct labor-
hours
11,200
The direct labor rate is $19.90 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product J1
$268.20
Product E7
$165.80
The company is considering adopting an activity-based costing system with the following
activity cost pools, activity measures, and expected activity:
Expected Activity
Activity
Cost
Pools
Activity
Measures
Estimated
Overhead
Cost
Product
J1
Product
E7
Total
Labor-
related
DLHs
$372,512
5,600
5,600
11,200
3-557
Machine
setups
setups
41,670
300
200
500
General
factory
MHs
404,504
3,000
2,900
5,900
$818,686
The activity rate for the Labor-Related activity cost pool under activity-based costing is
closest to:
3-558
143.
Minon, Inc., manufactures and sells two products: Product J1 and Product E7. Data
concerning the expected production of each product and the expected total direct labor-
hours (DLHs) required to produce that output appear below:
Expected
Production
Direct Labor-Hours Per
Unit
Total Direct Labor-
Hours
Product J1
800
7.0
5,600
Product E7
700
8.0
5,600
Total direct labor-
hours
11,200
The direct labor rate is $19.90 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product J1
$268.20
Product E7
$165.80
The company is considering adopting an activity-based costing system with the following
activity cost pools, activity measures, and expected activity:
Expected Activity
Activity Cost Pools
Activity Measures
Estimated
Overhead Cost
Product
J1
Product
E7
Total
Labor-related
DLHs
$372,512
5,600
5,600
11,200
Machine setups
setups
41,670
300
200
500
General factory
MHs
404,504
3,000
2,900
5,900
$818,686
The overhead applied to each unit of Product J1 under activity-based costing is closest
to:
3-559
3-560
3-561
144.
Punches, Inc., manufactures and sells two products: Product H7 and Product Y2. Data
concerning the expected production of each product and the expected total direct labor-
hours (DLHs) required to produce that output appear below:
Expected
Production
Direct Labor-Hours Per Unit
Total Direct Labor-Hours
Product H7
100
6.0
600
Product Y2
900
4.0
3,600
Total direct labor-hours
4,200
The direct labor rate is $17.80 per DLH. The direct materials cost per unit for each
product is given below:
Direct Materials Cost per Unit
Product H7
$132.50
Product Y2
$266.40
The company is considering adopting an activity-based costing system with the following
activity cost pools, activity measures, and expected activity:
Expected Activity
Activity
Cost
Pools
Activity
Measures
Estimated
Overhead
Cost
Product
H7
Product
Y2
Total
Labor-
related
DLHs
$205,296
600
3,600
4,200
Machine
setups
38,380
400
600
1,000
3-562
setups
General
factory
MHs
528,198
3,400
3,200
6,600
$771,874
If the company allocates all of its overhead based on direct labor-hours using its
traditional costing method, the overhead assigned to each unit of Product Y2 would be
closest to: