Hewett,Inc. ,manufactures and sells two products: Product E7 and Product U7.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 $29.50 per DLH.The direct materials cost per unit is $164.10 for Product E7 and $289.50 for Product U7. 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)$93.99 per DLH
B)$83.46 per DLH
C)$37.73 per DLH
D)$44.20 per DLH

Question

Hewett,Inc. ,manufactures and sells two products: Product E7 and Product U7.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 $29.50 per DLH.The direct materials cost per unit is $164.10 for Product E7 and $289.50 for Product U7. 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)$93.99 per DLH 
B)$83.46 per DLH 
C)$37.73 per DLH 
D)$44.20 per DLH

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $808,296 ÷ 8,600 DLHs = $93.99 per DLH (rounded)