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

question 16

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

• A) $11.71
• B) $38.69
• C) $171.89
• D) $23.87

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Definitions:

Gibberellin

Plant hormone promoting increased stem growth; also involved in flowering and seed germination.

Phytochrome

Photoreversible plant pigment that is involved in photoperiodism and other responses of plants, such as etiolation.

Cytokinins

Plant hormones that promote cell division and growth, delay the aging of leaves, and in conjunction with other hormones, regulate plant development.

Auxin

Plant hormone regulating growth, particularly cell elongation; also called indoleacetic acid (IAA).