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 variation 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 E76I under the activity-based 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 variation 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 E76I under the activity-based costing system is closest to:

Quizplus · Accepted Answer

The activity rates for each activity cost pool are computed as follows:
 11eacbfc_c89d_721b_8ffe_0304ea001859_TB7552_00 The overhead cost charged to Product E76I is:
 11eacbfc_c89d_721c_8ffe_6b1f4a04520b_TB7552_00 Manufacturing overhead applied to a unit of product E76I = $882,750 ÷ 10,000 units = $88.28 per unit

Feauto Manufacturing Corporation Has a Traditional Costing System in Which