Question

Titan Pride produces two product lines: T-shirts and Sweatshirts. The company has used a simple costing system since its inception. The budgeted factory overhead totals $242,000 and is allocated on the basis of 121,000 direct labor hours (DLHs). Additional production information for the two products is as follows: T-SHIRTS SWEATSHIRTS Production volume 60,000 units 35,000 units DHLs (per unit) 1.2 1.4 Direct costs (per unit) $ 6.50 $ 8.20 The company is currently considering implementing an ABC system to determine the unit costs of its products. The following ABC information has been collected: Activity Budgeted cost Cost allocation base Allocation base quantity T-shirts Sweatshirts Supervision $100,920 DLHs 45,000 42,000 Inspection $141,080 Number of Inspections 53,040 17,500

Under the simple costing system, what is the predetermined overhead rate using DLH as the single cost driver? Group of answer choices

$1.2 / DLH

$2 / DLH

$1.4 / DLH

$2.6 / DLH

Under the simple-costing system, what is unit cost of a sweatshirt? Group of answer choices

$8.50

$11.00

$10.20

$9.60

Under the ABC system, what is the overhead rate for the supervision activity? Group of answer choices

$2/DLH

$2.40/DLH

$2.24/DLH

$1.16/DLH

Under the ABC system, the unit cost of a sweatshirt will be Group of answer choices

$10.59

$10.2

$11.36

$9.59

Assume that the ABC provides more accurate cost information. Based on the above results, it can be inferred that, under simple costing, T-shirts (NOT sweatshirts) are Group of answer choices

overcosted

properly costed

undercosted

More information is needed to answer this question

Answer 1