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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:
Expected Activity
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:
3-265
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 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 predetermined overhead rate would be closest to:
3-267
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
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:
3-269
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
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:
3-271
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:
3-274
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 setups 38,380 400 600 1,000
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:
3-276
145. 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 setups 38,380 400 600 1,000
General factory MHs 528,198 3,400 3,200 6,600
$771,874
The overhead applied to each unit of Product Y2 under activity-based costing is closest to:
3-279
146. 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 setups 38,380 400 600 1,000
General factory MHs 528,198 3,400 3,200 6,600
$771,874
3-280
Which of the following statements concerning the unit product cost of Product H7 is true?
