Reference: 05-01
Acton Company Has Two Products: a and B

question 29

Multiple Choice

Reference: 05-01
Acton Company has two products: A and B. The annual production and sales of Product A are 800 units and of Product B are 500 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
0.2 direct labour-hours per unit. The total estimated overhead for next period is $92,023.
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: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated } \\\text { Overhead } \\\text { Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 14,487 & 500 & 600 & 1,100 \\\hline \text { Activity 2 } & \$ 64,800 & 2,500 & 500 & 3,000 \\\hline \text { General Factory } & \$ 12,736 & 240 & 100 & 340 \\\hline \text { Total } & \$ 92,023 & & & \\\hline\end{array}$$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)
-The predetermined overhead rate (i.e., activity rate) for Activity 1 under the activity-based costing system is closest to:

• A)$83.66.
• B)$24.15.
• C)$13.17.
• D)$28.97.

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Definitions:

Components In Series

This refers to the arrangement of parts or elements in a sequence where each component is connected directly after the previous one, ensuring the same current flows through all components.

Component Reliability

The likelihood of a component to perform its required function under stated conditions for a specific period.

Parallel Set

A visualization technique used to display the relationships across multiple categorical variables.

Components In Series

A configuration of parts in a system arranged such that each component must work for the system to function, where failure of any single component results in system failure.