Machuga,Inc. ,manufactures and sells two products: Product C1 and Product M2.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 $18.70 per DLH.The direct materials cost per unit is $297.00 for Product C1 and $246.20 for Product M2. 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 M2 would be closest to:
A)$752.40 per unit
B)$412.28 per unit
C)$1,122.22 per unit
D)$1,083.39 per unit

Question

Machuga,Inc. ,manufactures and sells two products: Product C1 and Product M2.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 $18.70 per DLH.The direct materials cost per unit is $297.00 for Product C1 and $246.20 for Product M2. 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 M2 would be closest to:
A)$752.40 per unit 
B)$412.28 per unit 
C)$1,122.22 per unit 
D)$1,083.39 per unit

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $1,520,102 ÷ 14,900 DLHs = $102.02 per DLH (rounded)
Product M2: 11.0 DLHs × $102.02 per DLH = $1,122.22