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

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