Acton Company has two products: A and B.
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Acton Company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 500 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. 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 Overhead Cost Driver Units*
Cost Pool Cost Driver Costs Product A Product B Total
Activity 1 Customer Orders $14,500 500 600 1,100
Activity 2 Machine Hrs $64,800 1,500 500 2,000
General Fact.Direct Labor Hrs $22,700 1,800 100 1,900
Total $102,000
* Assume that the actual number of cost driver units consumed is the same as the estimated number.
3(a). The predetermined overhead rate under the traditional single-rate costing system is closest to:
3(b). The overhead cost per unit of Product B under the traditional costing system is closest to:
3(c). The amount of Activity 1 cost per unit of Product B under the activity based costing system is closest to:
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Solution Summary
This solution is comprised of a detailed explanation to compute overhead rate & cost per unit.
Solution Preview
3(a). The predetermined overhead rate under the traditional single-rate costing system is closest to:
Predetermined overhead rate = Total Overhead Costs/Direct Labor Hrs
= $102,000/1,900 Hrs
= ...
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