Vandalay Industries Manufactures Two Products: Toasters and Blenders

question 228

Multiple Choice

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2100 units, while 1500 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders require .75 direct labor hours per unit. The total estimated overhead for the period is $149,015. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools: The predetermined overhead allocation rate using the traditional costing system would be closest to
(Round all answers to two decimal places.)

• A)$39.68 per direct labor hour.
• B)$124.70 per direct labor hour.
• C)$54.78 per direct labor hour.
• D)$38.06 per direct labor hour.

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Definitions:

Firm

A business organization, such as a corporation, partnership, or sole proprietorship, engaged in professional, commercial, or industrial activities.

Labor Hours

Labor hours refer to the total number of hours worked by employees within a specified period, often used to measure productivity and labor costs.

Capital

Financial assets or the financial value of assets, such as funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories.

Price Ceilings

a government-imposed limit on how high a price can be charged for a product, service, or commodity.