Reference: 05-02
Addy Company Has Two Products: a and B

question 33

Multiple Choice

Reference: 05-02
Addy Company has two products: A and B. The annual production and sales of Product A are 1,700 units and of Product B are 1,100 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires
0.6 direct labour-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as
follows:
$$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated } \\\text { Overhead Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 30,528 & 1,000 & 600 & 1,600 \\\hline \text { Activity 2 } & \$ 17,385 & 1,700 & 200 & 1,900 \\\hline \text { General Factory } & \$ 50,872 & 510 & 660 & 1,170 \\\hline \text { Total } & \$ 98,785 & & & \\\hline\end{array}$$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)
-The overhead cost per unit of Product B under the activity-based costing system is closest to

• A)$26.09.
• B)$38.16.
• C)$35.28.
• D)$50.66.

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Definitions:

Title

represents legal ownership of property, giving the holder the rights to use, control, and transfer the property.

Tangible Object

An item that can be physically touched and seen, possessing material existence.

Intangible Object

An asset or property that does not have a physical presence but possesses value, such as intellectual property or digital assets.

Tangible Property

Physical property that can be touched and seen, such as buildings, machinery, and inventory.