Chang Manufacturing Corporation Has a Traditional Costing System in Which

Chang Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs) . The company has two products, Plain and Fancy, about which it has provided the following data:
$\begin{array}{lcc}&\text { Plain }& \text { Fancy }\\\text { Direct materials per unit } & \$ 24.50&\$59.30 \\\text { Direct labor per unit } & \$ 5.00 &\$25.00\\\text { Direct labor-hours per unit } & 0.20&1.00 \\\text { Annual production } & 45,000&15,000\end{array}$

The company's estimated total manufacturing overhead for the year is $985,440 and the company's estimated total direct labor-hours for the year is 24,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
$\begin{array}{lc}&\text { Estimated Overhead }\\\text { Activities and Activity Measures } & \text { Cost } \\\text { Supporting direct labor (DLHs) } & \$ 384,000 \\\text { Setting up machines (setups) } & 255,840\\\text {Parts administration (part types) }&345,600\\\text {Total}&\$985,440\end{array}$
$$\begin{array} { l r r r } & & { \text { Expected Activity } } \\ & { \text { Plain } } & \text { Fancy } & \text { Total } \\\text { DLuHs } & 9,000 & 15,000 & 24,000 \\\text { Setups } & 1,032 & 936 & 1,968 \\\text { Part types } & 624 & 240 & 864\end{array}$$

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The manufacturing overhead that would be applied to a unit of product Fancy under the activity-based costing system is closest to:

A) $71.57.
B) $41.06.
C) $8.11.
D) $30.51.

Correct Answer:

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