A Firm Produces and Sells Two Products, Plus and Max

question 27

Multiple Choice

A firm produces and sells two products, Plus and Max. The following information is available relating to setup costs (a part of factory overhead) : $\begin{array} { | l | r | r | } \hline & \text { Plus } & \text { Max } \\\text { Units produced } & 200 & 16,000\\\hline \text { Batch stze (units) }& 10 & 400 \\\hline \text { Number of setups } & 20 & 40 \\\hline \text { Direct labor hours per unit }& 5 & 5 \\\hline \text { Total direct labor hours }& \$ 1,000 & 80,000 \\\hline \text { Cost per setup }&\$1,080 \\\hline \text { Total setup cost } & \$ 64,800 & \\\hline\end{array}$
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With traditional allocation of overhead costs, using direct labor hours as the allocation base, the setup cost portion of overhead that is allocated to each unit of product for Plus and Max, respectively is:

• A) $160.00; $12,800.00.
• B) $.80; $.80.
• C) $4.00; $4.00.
• D) $3.20; $3.20.
• E) $200.00; $16,000.00.

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