Herne Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, G58O and E80Z, about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,116,900 and the company's estimated total direct labor-hours for the year is 30,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
Required:
a. Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.

Question

Herne Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, G58O and E80Z, about which it has provided the following data:  
The company's estimated total manufacturing overhead for the year is $1,116,900 and the company's estimated total direct labor-hours for the year is 30,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:  
Required:
a. Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.

Quizplus · Accepted Answer

The Answer is a. Traditional Manufacturing Overhead Costs
Predetermined overhead rate = $1,116,900

30,000 DLHs = $37.23 per DLH a. Traditional Manufacturing Overhead Costs Predetermined overhead rate = $1,116,900 30,000 DLHs = $37.23 per DLH

Herne Manufacturing Corporation Has a Traditional Costing System in Which