Markham Company makes two products: Basic Product and Deluxe Product. Annual production and sales are 1,500 units of Basic products and 1,100 units of Deluxe products. 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 the next period is $98,885.

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:

	Estimated				Expected Activity
Activity Cost Pool	Overhead Costs				Basic Product		Deluxe Product		Total
Activity 1	$	30,552			1,200		800		2,000
Activity 2		17,415			1,900		400		2,300
General Factory		50,918			450		660		1,110
Total	$	98,885

(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:

$42.99.

$27.52.

$38.63.

$41.39.

Answer rating: 100% (QA)

Activity Rate Activity 1 Activity 2 General Factor... View the full answer