Question

Feauto Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its...

Feauto Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, I63E and E76I, about which it has provided the following data:

I63E E76I
Direct materials per unit $ 21.90 $ 65.70
Direct labor per unit $ 11.10 $ 33.30
Direct labor-hours per unit 0.50 1.50
Annual production (units) 48,000 16,000


The company's estimated total manufacturing overhead for the year is $1,963,200 and the company's estimated total direct labor-hours for the year is 48,000.



The company is considering using a form of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

Activities and Activity Measures Estimated
Overhead Cost
Assembling products (DLHs) $ 960,000
Preparing batches (batches) 228,800
Product support (product variations) 774,400
Total $ 1,963,200


Expected Activity
I63E E76I Total
DLHs 24,000 24,000 48,000
Batches 1,250 720 1,970
Product variations 2,500 1,440 3,940

The manufacturing overhead that would be applied to a unit of product E76I under the activity-based costing system is closest to:

Garrison 16e Rechecks 2018-06-22 Garrison 16e Rechecks 2019-08-02, rev: 02_19_2020_QC_CS-201033

Multiple Choice

  • 52.92

  • 40.90

  • 122.70

  • 35.28

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Answer #1
Activity rate:
Assembling product 20.00 =960000/48000
Preparing batches 116.14 =228800/1970
Product support 196.55 =774400/3940
Product E76I:
Activity Activity rate Overhead allocated
Assembling product 24000 20.00 480000
Preparing batches 720 116.14 83621
Product support 1440 196.55 283032
Total 846653
Manufacturing overhead per unit 52.92 =846653/16000
52.92 is correct option
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