Adelberg Company has two products: A and B. The annual production and sales of Product A is 500 units and of Product B is 1,000 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756.The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and Order Size-with estimated overhead costs and expected activity as follows: EstimatedExpected ActivityActivity Cost
PoolsOverhead CostsProduct AProduct BTotalActivity 1$31,0311,0003001,300Activity 2 22,2491,6003001,900Order size 15,476200200400Total$68,756 (Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.)The predetermined overhead rate under the traditional costing system is closest to:
A. $23.87 per DLH
B. $38.69 per DLH
C. $11.71 per DLH
D. $171.89 per DLH
Answer: D
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