Which of the following statements concerning the unit product cost of Product A8 is true?

A) The unit product cost of Product A8 under traditional costing is greater than its unit product under activity-based costing by $331.64.
B) The unit product cost of Product A8 under traditional costing is less than its unit product cost under activity-based costing by $331.64.
C) The unit product cost of Product A8 under traditional costing is less than its unit product cost under activity-based costing by $1,540.33.
D) The unit product cost of Product A8 under traditional costing is greater than its unit product under activity-based costing by $1,540.33.

Question

Karen Sanzon · Accepted Answer

Final Answer : A, Explanation :  Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours= $919,309 ÷ 7,800 DLHs = $117.86 per DLH (rounded)Computation of traditional unit product cost:   Computation of activity rates:   Computation of the overhead cost per unit under activity-based costing.   Computation of unit product cost under activity-based costing.   The difference in unit product costs is:   The unit product cost of Product A8 under traditional costing is greater than its unit product under activity-based costing by $331.64.Reference: CH04-Ref28Gradwell, Inc., manufactures and sells two products: Product K8 and Product I4.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below:   The direct labor rate is $17.20 per DLH.The direct materials cost per unit for each product is given below:   The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

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