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

question 79

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 overhead cost per unit of Product B under the activity-based costing system is closest to which of the following?

• A) $26.09.
• B) $35.28.
• C) $38.16.
• D) $50.66.

Grasp the concept of Excel's temporary storage areas, like the Clipboard, for managing data.

Comprehend how Excel evaluates and executes complex formulas.

Understand the legal and ethical considerations in handling personal health information within HR.

Grasp the principles of effective compensation communication and its impact on employee satisfaction.

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Definitions:

Substitution Effect

The alteration in purchasing habits stemming from a shift in the relative cost of products, causing individuals to replace one item with another.

Price Change

A variation in the cost of a good or service over time or in response to supply and demand dynamics.

Income

The money received by an individual or entity in exchange for labor, from investments, or from any other source, over a period of time.

Utility Function

A mathematical representation that ranks an individual's or agent's preferences over sets of goods and services, yielding levels of satisfaction.