Poma 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, R78S and N32Y, about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $1,427,040 and the company's estimated total direct labor-hours for the year is 24,000.
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 unit product cost of product R78S under the company's traditional costing system is closest to:

Question

Poma 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, R78S and N32Y, about which it has provided the following data:  The company's estimated total manufacturing overhead for the year is $1,427,040 and the company's estimated total direct labor-hours for the year is 24,000.
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 unit product cost of product R78S under the company's traditional costing system is closest to:

Quizplus · Accepted Answer

Direct labor-hour calculation:
 11eacbfc_c89e_d1bb_8ffe_270e80e41a63_TB7552_00 Predetermined overhead rate = $1,427,040 ÷ 24,000 direct labor-hours = $59.46 per direct labor-hour
Overhead applied to each unit of product R78S = $59.46 per direct labor-hour × 0.4 direct labor-hours per unit = $23.78 per unit
 11eacbfc_c89e_f8cc_8ffe_4fa04f0f9ee1_TB7552_00

Poma Manufacturing Corporation Has a Traditional Costing System in Which