Matamoros, Inc., manufactures and sells two products: Product D7 and Product J3.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear 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 overhead assigned to each unit of Product J3 would be closest to:
A)$185.78 per unit
B)$511.56 per unit
C)$540.89 per unit
D)$125.23 per unit

Question

Matamoros, Inc., manufactures and sells two products: Product D7 and Product J3.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear 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 overhead assigned to each unit of Product J3 would be closest to:
A)$185.78 per unit 
B)$511.56 per unit 
C)$540.89 per unit 
D)$125.23 per unit

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $285,897 ÷ 3,700 DLHs = $77.27 per DLH (rounded)
Product J3: 7.0 DLHs × $77.27 per DLH = $540.89