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

question 59

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 predetermined overhead rate per DLH under the traditional costing system is closest to:

• A)$19.08.
• B)$43.48.
• C)$9.15.
• D)$84.43.

---

Definitions:

Ethical Issues

Concerns or dilemmas related to moral principles and values, which can arise in personal behavior, business practices, or technology use.

Generation Z

The demographic cohort following Generation Y, typically defined as those born from the mid-1990s to the early 2010s.

Baby Boomers

The demographic group born during the post-World War II baby boom, approximately between the years 1946 and 1964.

Generations

Groups of individuals, often grouped by birth years, who experience similar societal events and cultural shifts.