(Question and Answer): nd the expected total direct labor-hours (DLHs) required to produce that output appear below:

Boutet, Inc., manufactures and sells two products: Product G5 and Product U1. 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 G5 800 5.0 4,000
Product U1 800 3.0    2,400
Total direct labor-hours 6,400

The direct labor rate is $21.10 per DLH. The direct materials cost per unit is $241.40 for Product G5 and $283.80 for Product U1.

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(Question and Answer): nd the expected total direct labor-hours (DLHs) required to produce that output appear below:
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The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

Expected Activity
Activity Cost Pools Activity Measures Estimated
Overhead Cost
Product
G5
Product
U1
Total
Labor-related DLHs $200,640 4,000 2,400 6,400
Production orders orders 14,959 400 300 700
General factory MHs    610,416 4,200 3,900 8,100
$826,015

If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product G5 would be closest to:

$376.80 per unit

$645.30 per unit

$106.85 per unit

$156.75 per unit

Expert Answer

 

$645.30 per unit

Note:There may be rounding off difference.

Workings:

Step-1:Calculate Overhead rate per direct labour hour
Overhead Rate per direct labour hour = Total Overhead costs / Total direct labour hours
= $ 8,26,015 / 6,400
= $ 129.06
Step-2:Calculate Overhead costs of Product G5
Overhead costs of product G5 = Total direct labour hours x Overhead rate
= $ 4,000 x $ 129.06
= $ 5,16,259.38
Step-3:Calculate Overhead cost per unit of Product G5
Overhead Costs per Unit of Product G5 = Total Overhead costs of Product G5 / Total production of G5
= $ 5,16,259.38 / 800
= $ 645.32
Thus, Overhead cost per Unit of Product G5 is $ 645.32

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