Dunagin, Inc., manufactures and sells two products: Product U2 and Product H9.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: 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:
A)$35.65 per DLH
B)$41.15 per DLH
C)$88.77 per DLH
D)$48.59 per DLH

Question

Dunagin, Inc., manufactures and sells two products: Product U2 and Product H9.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below:  The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:  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:
A)$35.65 per DLH 
B)$41.15 per DLH 
C)$88.77 per DLH 
D)$48.59 per DLH

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $576,990 ÷ 6,500 DLHs = $88.77 per DLH (rounded)