BADM*2030 Chapter 4: Chapter 4 Test.doc
Document Summary
Addy company has two products: a and b. The annual production and sales of product a is. 1,700 units and of product b is 1,100 units. The company has traditionally used direct labour hours as the basis for applying all manufacturing overhead to products. Product a requires 0. 3 direct labour hours per unit, and product b requires 0. 6 direct labour hours per unit. The total estimated overhead for next period is ,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 factory overhead activity cost pools activity 1, activity 2, and general factory with estimated overhead costs and expected activity as follows: Solutions: ,785/([1,700 units x . 3 hours per unit] + [1,100 units x . 6 hours per unit]) = . 43, . 43 x . 6 hours per unit = . 66, ,385/(1,700 + 200) = $ 9. 15.
