Markham Company Makes Two Products: Basic Product and Deluxe Product

question 85

Multiple Choice

Markham Company makes two products: Basic Product and Deluxe Product.Annual production and sales are 1,700 units of Basic Product and 1,100 units of Deluxe Product.The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products.Basic Product requires 0.3 direct labor hours per unit and Deluxe Product requires 0.6 direct labor 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 external reports.The new activity-based costing system would have three overhead activity cost pools-Activity 1,Activity 2,and General Factory-with estimated overhead costs and expected activity as follows:

The overhead cost per unit of Deluxe Product under the traditional costing system is closest to:

• A) $50.66.
• B) $5.49.
• C) $26.09.
• D) $11.45.

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Definitions:

Mesozoic Era

A geological era that occurred between 252 and 66 million years ago, characterized by the dominance of dinosaurs.

Paleozoic

An era in the geologic time scale, occurring from about 541 million to 252 million years ago, noted for the early development of life on Earth.

Crinoids

Marine animals belonging to the class Crinoidea, characterized by a mouth on the top surface surrounded by feeding arms, part of the echinoderm phylum.

Trilobites

Extinct marine arthropods with a segmented body and calcified exoskeleton, prevalent from the Cambrian to the Permian period.