The predetermined overhead rate under the traditional costing system is closest to
Acklin Company has two products: A and B. Annual production and sales are 600 units of Product A and 900 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.5 direct labor hours per unit and Product B requires 0.3 direct labor hours per unit. The total estimated overhead for next period is $63,322. 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
Overhead
Expected Activity
Activity Cost Pool
Cost
Product A
Product B
Total
Activity 1
$18,900
700
200
900
Activity 2
15,631
1,000
100
1,100
General factory
28,791
300
270
570
Total
$63,322
The predetermined overhead rate under the traditional costing system is closest to:
A) $21.00
B) $14.21
C) $111.09
D) $50.51