Question

Look 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, N06D and M09K, about which it has provided the following data:

	N06D			M09K
Direct materials per unit	$	31.50		$	66.30
Direct labor per unit	$	14.00		$	26.00
Direct labor-hours per unit		0.20			1.00
Annual production (units)		45,300			21,200

The company's estimated total manufacturing overhead for the year is $1,492,786 and the company's estimated total direct labor-hours for the year is 30,260.

The company is considering using a variation 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
Supporting direct labor (DLHs)	$	665,720
Setting up machines (setups)		445,266
Parts administration (part types)		381,800
Total	$	1,492,786

	Expected Activity
	N06D	M09K	Total
DLHs	9,060	21,200	30,260
Setups	1,570	989	2,559
Part types	668	252	920

The manufacturing overhead that would be applied to a unit of product N06D under the company's traditional costing system is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• $4.86

• $9.87

• $13.39

• $21.40

Answer 1

Answer : $9.87

Trading Costing System

Predetermined overhead rate = Estimated Manufacturing OH / Estiamted Direct Labor Hours

Predetermined Overhead Rate = 1,492,786 /30,260 = 49.33

Manufacturing overheads Applied to N06D = 49.33*9060 =446.929.80

Manufactruing overhead Per Unit = 446,929.80 / 45,300 = $9.87 (Answer)