Koszyk Manufacturing Corporation Has a Traditional Costing System in Which

question 34

Multiple Choice

Koszyk Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs) . The company has two products, P85G and C43S, about which it has provided the following data:
$\begin{array} { | l | r | r | } \hline & \text { P85G } & \text { C43S } \\\hline \text { Direct materials per unit } & \$ 36.50 & \$ 63.10 \\\hline \text { Direct labour per unit } & \$ 20.80 & \$ 31.20 \\\hline \text { Direct labour hours per unit } & 0.80 & 1.20 \\\hline \text { Annual production } & 35,000 & 10,000 \\\hline\end{array}$
The company's estimated total manufacturing overhead for the year is $2,264,000 and the company's estimated total direct labour-hours for the year is 40,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for externalreports. Data for this proposed activity-based costing system appear below: $\begin{array} { | l | r | } \hline \text { Activities and Activity Measures } & \text { Estimated Overhead Cost } \\\hline \text { Supporting direct labour (DLHs) } & \$ 1,160,000 \\\hline \text { Setting up machines (setups) } & 288,000 \\\hline \text { Parts administration (part types) } & \underline { 816,000 } \\\hline \text { Total } & \$ 2,264,000 \\\hline\end{array}$

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Expected Activity }$
$\begin{array} { | l | r | r | r | } \hline & \text { P85G } & \text { C43S } & \text { Total } \\\hline \text { DLHs } & 28,000 & 12,000 & 40,000 \\\hline \text { Setups } & 1,480 & 920 & 2,400 \\\hline \text { Part types } & 1,880 & 840 & 2,720 \\\hline\end{array}$


- The total cost of a unit of product P85G under the company's traditional costing system is closest to:

• A) $146.97
• B) $102.58
• C) $101.69
• D) $80.50

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Definitions:

Operational Activities

Actions and tasks associated with the day-to-day operations of a business, focusing on core business activities.