Diemer,Inc. ,manufactures and sells two products: Product N4 and Product R7.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)$39.68 per DLH
B)$81.82 per DLH
C)$29.71 per DLH
D)$47.79 per DLH

Question

Diemer,Inc. ,manufactures and sells two products: Product N4 and Product R7.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)$39.68 per DLH 
B)$81.82 per DLH 
C)$29.71 per DLH 
D)$47.79 per DLH

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $736,342 ÷ 9,000 DLHs = $81.82 per DLH (rounded)