Cassidy Manufacturing Corporation Has a Traditional Costing System in Which

Cassidy 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, VIP and Kommander, about which it has provided the following data:
$\begin{array}{lcc} &\text {VIP}&\text {Kommander}\\ \text { Direct materials per unit } & \$ 27.50 & \$62.10 \\\text { Direct labor per unit } & \$ 15.60 & \$52.00\\ \text { Direct labor-hours per unit } & 0.60 & 2.00\\\text { Annual production }&40,000&15,000\end{array}$

The company's estimated total manufacturing overhead for the year is $2,449,440 and the company's estimated total direct labor-hours for the year is 54,000.
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:
$$\begin{array} { l r } & \text { Estimated Overhead } \\\text { Activities and Activity Measures }& \text { Cost } \\\text { Assembling products (DLHs) } & \$ 918,000 \\\text { Preparing batches (batches) }& 397,440 \\\text { Product support (product variations) } & 1,134,000 \\\text { Total } & \$ 2,449,440 \\\end{array}$$
$$\begin{array} { l r r r } & { \text { Expected Activity } } \\&{ \text { VIP } } & \text {Kommander } & \text { Total } \\\text { DLHs } & 24,000 & 30,000 & 54,000 \\ \text { Batches }& 1,458 & 1,026 & 2,484 \\\text { Product variations }& 2,592 & 1,189 & 3,780\end{array}$$
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The unit product cost of Product VIP under the company's traditional costing system is closest to:

A) $53.30.
B) $70.32.
C) $43.10.
D) $78.57.

Correct Answer:

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