Diemer, Inc., manufactures and sells two products: Product N4 and Product R7. Da

Question

Diemer, Inc., manufactures and sells two products: Product N4 and Product R7. 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:

$39.68 per DLH

$29.71 per DLH

$47.79 per DLH

$81.82 per DLH

Explanation / Answer

Particulars Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product N4                  200                          9                 1,800 Product R7                  900                          8                 7,200 Total               1,100                        17                 9,000 Overhead Rate Based on Direct Labour Hrs = Direct Labour Cost/ Direct Labour Hrs = 736342/9000 =                   81.82 Overhead Rate Based on Direct Labour Hrs = 81.82 Per Direct Labour Hour

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