Boutet,Inc. ,manufactures and sells two products: Product G5 and Product U1.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 $21.10 per DLH.The direct materials cost per unit is $241.40 for Product G5 and $283.80 for Product U1. 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 G5 would be closest to:
A)$376.80 per unit
B)$645.30 per unit
C)$106.85 per unit
D)$156.75 per unit

Question

Boutet,Inc. ,manufactures and sells two products: Product G5 and Product U1.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 $21.10 per DLH.The direct materials cost per unit is $241.40 for Product G5 and $283.80 for Product U1. 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 G5 would be closest to:
A)$376.80 per unit 
B)$645.30 per unit 
C)$106.85 per unit 
D)$156.75 per unit

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $826,015 ÷ 6,400 DLHs = $129.06 per DLH (rounded)
Product G5: 5.0 DLHs × $129.06 per DLH = $645.30