Addy Company Has Two Products: a and B $\quad$ $\quad$

question 89

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 externalreports. 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:

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Expected Activity }$
$\begin{array}{|l|r|r|r|r|r}\hline \begin{array}{l}\text { Activity Cost } \\\text { Pool }\end{array} & \begin{array}{r}\text { Estimated } \\\text { Overhead Cost }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 30,528 & 1,000 & 600 & 1,600 \\\hline \text { Activity 2 } & 17,385 & 1,700 & 200 & 1,900 \\\hline \text { General Factory } & \underline{50,872} & 510 & 660 & 1,170 \\\hline \text { Total } & \$ 98,785 & & &\\\hline\end{array}$

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

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

Understand the principles of amortization and loan repayment schedules.

Apply financial knowledge to make informed decisions regarding investment and loan options.

Calculate the equivalent value of combined payments due at different times using given rates of return.

Understand and calculate the value of investments and loans with variable interest rates over time.

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Definitions:

Business Investors

Individuals or entities that allocate capital with the expectation of receiving financial returns, typically into companies or projects.

Debt Financing

The method of raising capital through the sale of bonds, bills, or notes to individuals or institutional investors which must be repaid at a later date.

Equity Financing

The process of raising capital through the sale of shares in a company.

Term

The time until a debt security’s principal is due to be repaid. Also called the debt’s maturity or time until maturity.