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 predetermined overhead rate under the traditional costing system is closest to:

a. $9.15.

b. $43.48.

c. $84.43.

d. $19.08.

Transcribed Image Text:

Activity Cost Pool Activity 1 Activity 2 General Factory Total Estimated Overhead Costs $ 30,528 17,385 50,872 $ 98,785 Basic Product 1,000 1,700 510 Expected Activity Deluxe Product 600 200 660 Total 1,600 1,900 1,170 Activity Cost Pool Activity 1 Activity 2 General Factory Total Estimated Overhead Costs $ 30,528 17,385 50,872 $ 98,785 Basic Product 1,000 1,700 510 Expected Activity Deluxe Product 600 200 660 Total 1,600 1,900 1,170

Answer rating: 100% (QA)

c 8443 Total hours 17003 11006 5... View the full answer