Vandalay Industries Manufactures Two Products: Toasters and Blenders

Multiple Choice

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2,200 units, while 1,500 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders require .75 direct labor hours per unit. The total estimated overhead for the period is $149,115. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools: The predetermined overhead allocation rate using the traditional costing system would be closest to

A) $40.30 per direct labor hour.
B) $132.55 per direct labor hour.
C) $54.22 per direct labor hour.
D) $38.48 per direct labor hour.