Trone, Inc., manufactures and sells two products: Product R8 and Product K9.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 $17.60 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to:
A)$21.89 per DLH
B)$75.46 per DLH
C)$15.37 per DLH
D)$42.71 per DLH

Question

Trone, Inc., manufactures and sells two products: Product R8 and Product K9.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 $17.60 per DLH.The direct materials cost per unit for each product is given below:  The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:  If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to:
A)$21.89 per DLH 
B)$75.46 per DLH 
C)$15.37 per DLH 
D)$42.71 per DLH

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $503,952 ÷ 11,800 DLHs = $42.71 per DLH (rounded)