Asked by Diana Stevenson on Jul 06, 2024
Verified
Lefave, Inc., manufactures and sells two products: Product Q1 and Product D5.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: 
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: 
If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to:
A) $26.29 per DLH
B) $70.04 per DLH
C) $69.87 per DLH
D) $27.31 per DLH
Product Q1
Designates the first quarter's product or output in a company's fiscal year.
- Ascertain rates of overhead and put this information to use in evaluating costs for products under Activity-Based Costing.
- Develop an understanding of how to allocate overhead expenses through diverse activity drivers.
Verified Answer
YH
Yanet HernandezJul 07, 2024
Final Answer :
B
Explanation :
To calculate the predetermined overhead rate using the traditional costing method, we need to divide the estimated total overhead costs by the estimated total direct labor-hours:
$9,018,000 / 128,850 DLHs = $70.04 per DLH
Therefore, the closest option is B) $70.04 per DLH.
$9,018,000 / 128,850 DLHs = $70.04 per DLH
Therefore, the closest option is B) $70.04 per DLH.
Explanation :
Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours
= $406,216 ÷ 5,800 DLHs = $70.04 per DLH (rounded)
= $406,216 ÷ 5,800 DLHs = $70.04 per DLH (rounded)
Learning Objectives
- Ascertain rates of overhead and put this information to use in evaluating costs for products under Activity-Based Costing.
- Develop an understanding of how to allocate overhead expenses through diverse activity drivers.