Addy company has two products a and b the annual production

Reference no: EM13581056

Addy Company has two products: A and B. The annual production and sales of Product A is 2,350 units and of Product B is 1,750 units. 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 0.7 direct labor-hours per unit. The total estimated overhead for next period is $106,000.

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

Activities	Estimated Overhead cost	Expected Activity
Activities	Estimated Overhead cost	Product A	Product B	Total
Activity 1	$32,754	1,650	1,250	2,900
Activity 2	18,656	2,350	850	3,200
General Factory	54,590	940	1,225	2,165
Total	$106,000

Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor-hours.)

The predetermined overhead rate under the traditional costing system is closest to?

Reference no: EM13581056

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