(Appendix 2A) Adelberg Corporation Makes Two Products: Product a and Product

question 10

Multiple Choice

(Appendix 2A) Adelberg Corporation makes two products: Product A and Product B. Annual production and sales are 500 units of Product A and 1,000 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756.
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:
(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor-hours.)
-The overhead cost per unit of Product B under the traditional costing system is closest to:

• A) $2.34
• B) $7.74
• C) $4.77
• D) $34.38

Evaluate the efficiency and benefits of adopting an ABC system over traditional costing methods.

Analyze the impact of production plans on product costing.

Compare and contrast the outcomes of costing methods for decision-making purposes.

Calculate material, labor, and overhead costs accurately.

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