Brenneis,Inc. ,manufactures and sells two products: Product T9 and Product T2.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 $18.10 per DLH.The direct materials cost per unit is $115.20 for Product T9 and $221.40 for Product T2. The company is considering adopting an activity-based costing system with the following activity cost pools,activity measures,and expected activity: Which of the following statements concerning the unit product cost of Product T9 is true?
A)The unit product cost of Product T9 under traditional costing is greater than its unit product under activity-based costing by $77.93.
B)The unit product cost of Product T9 under traditional costing is less than its unit product cost under activity-based costing by $77.93.
C)The unit product cost of Product T9 under traditional costing is greater than its unit product under activity-based costing by $224.16.
D)The unit product cost of Product T9 under traditional costing is less than its unit product cost under activity-based costing by $224.16.

Question

Brenneis,Inc. ,manufactures and sells two products: Product T9 and Product T2.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 $18.10 per DLH.The direct materials cost per unit is $115.20 for Product T9 and $221.40 for Product T2. The company is considering adopting an activity-based costing system with the following activity cost pools,activity measures,and expected activity:  Which of the following statements concerning the unit product cost of Product T9 is true?
A)The unit product cost of Product T9 under traditional costing is greater than its unit product under activity-based costing by $77.93. 
B)The unit product cost of Product T9 under traditional costing is less than its unit product cost under activity-based costing by $77.93. 
C)The unit product cost of Product T9 under traditional costing is greater than its unit product under activity-based costing by $224.16. 
D)The unit product cost of Product T9 under traditional costing is less than its unit product cost under activity-based costing by $224.16.

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
Computation of traditional unit product cost:
 11eaa3fe_3383_128e_908b_6ba1ef7f1732_TB2461_00 Computation of activity rates:
 11eaa3fe_3383_128f_908b_9b3fa6dabc0a_TB2461_00 Computation of the overhead cost per unit under activity-based costing.
 11eaa3fe_3383_39a0_908b_174101157b6b_TB2461_00 Computation of unit product cost under activity-based costing.
 11eaa3fe_3383_60b1_908b_65db03128453_TB2461_00 The difference in unit product costs is:
 11eaa3fe_3383_60b2_908b_2965e20bd81e_TB2461_00 The unit product cost of Product T9 under traditional costing is less than its unit product cost under activity-based costing by $77.93.