(Appendix 2A) 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:
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:

-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

Question

(Appendix 2A) 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:
  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:
  
-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

Quizplus · Accepted Answer

Direct labor-hour calculation:
 11ea7761_1988_0925_81a5_09d01d61c92a_TB2580_00 Predetermined overhead rate = $2,172,580 ÷ 46,000 direct labor-hours = $47.23 per direct labor-hour
Overhead per unit of product P93S = $47.23 per direct labor-hour × 0.80 direct labor-hours per unit
= $37.78 per unit
 11ea7761_1988_3036_81a5_a7961fac1617_TB2580_00

(Appendix 2A) Coudriet Manufacturing Corporation Has a Traditional Costing System