Russell Manufacturing Corporation Has a Traditional Costing System in Which

Russell 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, Slow and Fast, about which it has provided the following data:
$\begin{array}{lrrrr}&\text { Slow}&\text { Fast }\\\text { Direct materials per unit } & \$ 14.10 & \$ 43.40 \\\text { Direct labor per unit } & \$ 3.20 & \$ 25.60 \\\text { Direct labor-hours per unit } & 0.20 & 1.60 \\\text { Annual production } & 30,000 & 15,000\end{array}$

The company's estimated total manufacturing overhead for the year is $1,526,700 and the company's estimated total direct labor-hours for the year is 30,000.
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:
$\begin{array}{lc}&\text { Estimated Overhead }\\\text { Activities and Activity Measures } & \text { Cost } \\\text { Assembling products (DLHs) } & \$720,000 \\\text { Preparing batches (batches) } & 362,700\\\text {Product support (product variations) }&444,000\\\text {Total}&\$1,526,700\end{array}$


$$\begin{array} { l r r r } & { \text { Expected Activity } } \\& \text { Slow } & \text { Fast } & \text { Total } \\\text { DLHs } & 6,000 & 24,000 & 30,000 \\\text { Batches } & 1,380 & 1,410& 2,790 \\\text { Product variations }& 570& 540& 1,110\end{array}$$

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The manufacturing overhead that would be applied to a unit of product Slow under the company's traditional costing system is closest to:

A) $18.38.
B) $28.56.
C) $10.18.
D) $4.80.

Correct Answer:

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