Addy Company Has Two Products: a and B

question 106

Multiple Choice

Addy Company has two products: A and B. The annual production and sales of Product A is 1,700 units and of Product B is 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 factory overhead activity cost pools—Activity 1, Activity 2, and General Factory—with estimated overhead costs and expected activity as follows:

(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour hours.)
-(Appendix 5B) The overhead cost per unit of Product B under the traditional costing system is closest to which of the following?

• A) $5.49.
• B) $11.45.
• C) $26.09.
• D) $50.66.

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Definitions:

Voluntary Action

Actions that are performed as a result of conscious choice or decision, under the control of an individual's will.

Somatosensory Cortex

A region of the brain that processes sensory input from various body parts, contributing to our sense of touch, temperature, and body position.

Motor Cortex

The region of the cerebral cortex involved in the planning, control, and execution of voluntary movements.

Parietal Lobes

Regions of the brain located behind the frontal lobes, responsible for processing sensory information and spatial orientation.