Vintage Fun reproduces old-fashioned style roller skates and skateboards.The annual production and sales of roller skates is 950 units,while 1,750 skateboards are produced and sold.The company has traditionally used direct labor hours to allocate its overhead to products.Roller skates require 2.5 direct labor hours per unit,while skateboards require 1.25 direct labor hours per unit.The total estimated overhead for the period is $114,300.The company is looking at the possibility of changing to an activity-based costing system for its products.If the company used an activity-based costing system,it would have the following three activity cost pools:
The overhead cost per skateboard using the traditional costing system would be closest to:

Question

Vintage Fun reproduces old-fashioned style roller skates and skateboards.The annual production and sales of roller skates is 950 units,while 1,750 skateboards are produced and sold.The company has traditionally used direct labor hours to allocate its overhead to products.Roller skates require 2.5 direct labor hours per unit,while skateboards require 1.25 direct labor hours per unit.The total estimated overhead for the period is $114,300.The company is looking at the possibility of changing to an activity-based costing system for its products.If the company used an activity-based costing system,it would have the following three activity cost pools: 
The overhead cost per skateboard using the traditional costing system would be closest to:

Quizplus · Accepted Answer

A)Roller skate DL hours: 950 × 2.5 = 2,375
Skateboard DL hours: 1,750 × 1.25 = 2,187.5
Predetermined OH rate: (6,550 + 16,500 + 91,250)/ (2,375 + 2,187.5)= 25.05
Skateboard activity: 25.05 × 2,187.5 = 54,801.37
OH per unit: 54,801.37 / 1,750 = 31.32

Vintage Fun Reproduces Old-Fashioned Style Roller Skates and Skateboards