Manufacturing overhead to products

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Reference no: EM13928677

Addy Company makes two products: Product A and Product B. Annual production and sales are 1,100 units of Product A and 700 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 0.40 direct labor hours per unit and Product B requires 0.50 direct labor hours per unit. The total estimated overhead for next period is $65,128.

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:

		Expected Activity

Activity Cost Pool	Estimated Overhead Costs		Product A	Product B	Total
Activity 1	$23,405		1,200	350	1,550
Activity 2	10,044		1,100	140	1,240
General Factory	31,679		330	420	750

Total	$65,128

(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor hours.)
The predetermined overhead rate under the traditional costing system is closest to: (Round your final answer to 2 decimal places.)

Reference no: EM13928677

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