Question

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:

	Expected Production	Direct Labor-Hours Per Unit	Total Direct Labor-Hours
Product Q1	1,900	5.9	11,210
Product D5	850	2.9	2,465
Total direct labor-hours			13,675

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 Q1	Product D5	Total
Labor-related	DLHs	$	161,482	11,210	2,465	13,675
Product testing	tests		57,909	850	750	1,600
Order size	MHs		213,825	4,700	4,600	9,300
		$	433,216

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:

Answer 1

Answer---------$31.68 per Direct labor hour

Working

Predetermined overhead rate
Total Overheads	$      433,216.00
Total direct labor Hours	13675
Predetermined overhead rate	$                 31.68