Adelberg Corporation makes two products: Product A and Product B. Annual production and sales are...
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Adelberg Corporation makes two products: Product A and Product B. Annual production and sales are 500 units of Product A and 1,000 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 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756. 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 Estimated Overhead Product Activity Cost Pool Costs Product B Total Activity 1 $31,031 1,000 300 1,300 Activity 2 22,249 1,600 300 1,900 General Factory 15,476 200 200 400 Total $68,756 (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor hours.) The predetermined overhead rate (.e., activity rate) for Activity 2 under the activity based costing system is closest to
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