Markham Company Makes Two Products: Basic Product and Deluxe Product

question 121

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:

(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor hours. )
The overhead cost per unit of Deluxe Product under the activity-based costing system is closest to:

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

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Definitions:

Nonrandom Sampling

A sampling technique where the samples are gathered in a process that does not give all the individuals in the population equal chances of being selected.

Sampling Error

Sampling error is the discrepancy between a sample statistic and its corresponding population parameter, caused by selecting a sample rather than conducting a census.

Mean Income

The average amount of income received over a specific period of time, calculated by dividing the total income by the number of recipients.

Binomial Variable

Variable consisting of exactly two categories.