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  3. addison company has two products: a and b. annual

Addison Company has two products: A and B. Annual production and sales are 800 units...

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Accounting

Addison Company has two products: A and B. Annual production and sales are 800 units of Product A and 700 units of Product B. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.2 direct labour hours per unit and Product B requires 0.6 direct labour hours per unit. The total estimated overhead for next period is $71,286. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for externalreports. The new activity-based costing system would have three factory 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 Cost Product A Product B Total Activity 1 $20,272 300 500 800 Activity 2 29,380 800 500 1,300 General Factory 21,634 160 420 580 Total $71,286 (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour hours.) (Appendix 7A) The predetermined overhead rate under the traditional costing system is closest to:

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