Feauto 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, I63E and E76I, about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $2,063,250 and the company's estimated total direct labor-hours for the year is 45,000.
The company is considering using a form of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
The manufacturing overhead that would be applied to a unit of product I63E under the company's traditional costing system is closest to:

Question

Feauto 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, I63E and E76I, about which it has provided the following data:  The company's estimated total manufacturing overhead for the year is $2,063,250 and the company's estimated total direct labor-hours for the year is 45,000.
The company is considering using a form of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
  The manufacturing overhead that would be applied to a unit of product I63E under the company's traditional costing system is closest to:

Quizplus · Accepted Answer

11eacbfc_c89c_fce7_8ffe_e3b002dd16a8_TB7552_00 Predetermined overhead rate = $2,063,250 ÷ 45,000 direct labor-hours = $45.85 per direct labor-hour
Overhead applied to a unit of product I63E = $45.85 per direct labor-hours × 0.80 direct labor-hours per unit = $36.68 per unit

Feauto Manufacturing Corporation Has a Traditional Costing System in Which