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 overhead assigned to each unit of Product R4 would be closest to:
A)$122.52 per unit
B)$174.00 per unit
C)$250.86 per unit
D)$91.38 per unit

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 overhead assigned to each unit of Product R4 would be closest to:
A)$122.52 per unit 
B)$174.00 per unit 
C)$250.86 per unit 
D)$91.38 per unit

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $238,331 ÷ 5,700 DLHs = $41.81 per DLH (rounded)
Product R4: 6.0 DLHs × $41.81 per DLH = $250.86

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