Question

Mahaley, Inc., manufactures and sells two products: Product Q9 and Product F0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours
Product Q9 970 9.7 9,409
Product F0 970 7.7 7,469
Total direct labor-hours 16,878

The direct labor rate is $23.50 per DLH. The direct materials cost per unit for each product is given below:

Direct material cost per units
Product Q9 $176.60
Product F0 $148.40

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures and expected activity:

Activity Cost Pools Activity Measures Overhead Cost Product C1 Product M2 Total
Labor-related DLHs $558,452 7,200 7,700 14,900
Production orders orders 75,240 500 600 1,100
General factory MHs 886,410 4,400 4,600 9,000
$1,520,102

Required:

The overhead applied to each unit of Product C1 under activity-based costing is closest to:

a. $918.18 per unit.
b. $541.70 per unit.
c. $1,013.40 per unit.
d. $921.77 per unit.

Answer 1

Results are below.

Step-by-step explanation:

First, we need to calculate the predetermined overhead rate for each activity:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Labor-related= 558,452/14,900= $37.46 per direct labor hour

Production orders= 75,240/1,100= $68.4 per order

General factory= 886,410/9,000= $98.49 per machine-hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

C1:

Labor-related= 37.46*7,200= $269,712

Production orders= 68.4*500= $34,200

General factory= 98.49*4,400= $433,356

Total= $737,268

We weren't provided with information regarding the number of units of Product C1.