Question

Krypton Ltd.’s budgeted information relating to the manufacture of two of its products is presented below:

			# of times driver used
Activity	Cost	Driver	Product A	Product B
Setup	$56501	# of batches	30	10
Engineering	$121204	# of engineering hours	6657	9224
Machine Maintenance	$89140	# of machine hours	7000	12000
Direct labour cost	$11/hour		$352180	$528909
Direct materials			$126718	$96026

What would be the pre-determined overhead rate under a traditional costing model, with overhead allocated based on direct labour hours?

Select one:

a. $0.30

b. $1.20

c. $16.80

d. $3.33

Waymire Ltd. currently uses a traditional costing system based on direct labour hours to allocate overhead. This year, the company has budgeted to produce 1602 units of one of its products. Each unit requires 3 hours of direct labour.

For the coming year, the company is considering changing to an activity based costing system by allocating overhead based on 3 activities. The following are the activities, budgeted total cost and cost drivers per activity for the upcoming year:

Activity	Cost driver	Cost	Cost Base Volume
Processing	machine hours	$866307	20619
Assembly	direct labour hours	$414317	114556
Inspection	# of inspections	$700768	40869

Waymire Ltd. has estimated the consumption of each of the activities for this product: 1988 machine hours and 2987 inspections.

What is the product’s overhead cost per unit if Waymire continues to allocate overhead using the current costing system?

Select one:

a. $94.96

b. $10.85

c. $51.89

d. $17.30

Answer 1