Chang Manufocturing Corporation company has two products, Plain and Fancy, about

Question

Chang Manufocturing Corporation company has two products, Plain and Fancy, about which it has provided the following sato has a tro t ono costing system which op e manu cu n er ht to t po cas iin manufacturing overheed to its pr oduats etm nin-wrhed i ledmiren i urs he Direct materlels per unt 5 26.30 6110 s 470 5 2350 150 55,00015,000 Direct labor per unt Direct labor-hours per unt Annual production T e year is $1372 800 and the compary's The company's estimated total monufocturing overhead for t The company is considering using a variotion of activity-based costing to determine its unit estimated total direct labor hours for the year is 39.000 exiernal roports Data for this proposed activity based cosing system eppoar below Estimeted Ovemend and Activity Meesures Cost s 585000 Supporting direct labor IDLHS) Selting up machines (setups 285.600 Parts edministration tpein typest Total Expectad A Foncy Plan 817 Setup Part types 696

Explanation / Answer

Computation of the manufacturing overhead that would be applied to a unit of product Plain under the company's traditional costing system:
Under traditional costing system, Overhead cost will be applied based on predetermined overhead rate, based on direct labor hours.
Predetermined overhead rate = $1,372,800 / 39,000 = $35.20 per DLH
Manufacturing overhead = (0.30 DLHs × $35.20 per DLH) = $10.56

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