Mcleese, Inc., manufactures and sells two products: Product I6 and Product L1. D
ID: 2473589 • Letter: M
Question
Mcleese, Inc., manufactures and sells two products: Product I6 and Product L1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I6 800 8.0 6,400 Product L1 700 5.0 3,500 Total direct labor-hours 9,900 The direct labor rate is $26.60 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I6 $255.60 Product L1 $196.80 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product I6 Product L1 Total Labor-related DLHs $215,622 6,400 3,500 9,900 Machine setups setups 69,938 600 500 1,100 General factory MHs 382,275 3,800 3,700 7,500 $667,835 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product L1 would be closest to: $254.85 per unit $337.30 per unit $317.90 per unit $108.90 per unit
Explanation / Answer
Answer:
Predetermined overhead rate=667835/9900=$67.46 per DLH
Overhead assigned to Product L1=67.46*5=337.30