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Markham Company makes two products: Basic Product and Deluxe Product. Annual production and sales are...

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Accounting

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Markham Company makes two products: Basic Product and Deluxe Product. Annual production and sales are 1,700 units of Basic Product and 1,100 units of Deluxe Product. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Basic Product requires 0.3 direct labor hours per unit and Deluxe Product requires 0.6 direct labor hours per unit. The total estimated overhead for next period is $98,785. 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 poolsActivity 1, Activity 2, and General Factorywith estimated overhead costs and expected activity as follows: Activity Cost Pool Activity 1 Activity 2 General Factory Total Estimated Overhead Costs $30,528 17,385 50,872 $98,785 Expected Activity Basic Deluxe Product Product Total 1,000 600 1,600 1,700 200 1,900 510 660 1,170 (Note: The General Factory costs are allocated on the basis of direct labor hours.) The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to: Multiple Choice

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