Serva,Inc. ,manufactures and sells two products: Product R4 and Product N4.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $24.70 per DLH.The direct materials cost per unit for each product is given 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)$41.81 per DLH
B)$15.23 per DLH
C)$20.42 per DLH
D)$29.00 per DLH

Question

Serva,Inc. ,manufactures and sells two products: Product R4 and Product N4.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below:  The direct labor rate is $24.70 per DLH.The direct materials cost per unit for each product is given 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)$41.81 per DLH 
B)$15.23 per DLH 
C)$20.42 per DLH 
D)$29.00 per DLH

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $238,331 ÷ 5,700 DLHs = $41.81 per DLH (rounded)

Serva,Inc ,Manufactures and Sells Two Products: Product R4 and Product