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: Plain FancyDirect materials per unit$24.50 $59.30 Direct labor per unit$5.00 $25.00 Direct labor-hours per unit 0.20 1.00 Annual production 45,000 15,000 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:Activities and Activity MeasuresEstimated Overhead CostSupporting direct labor (DLHs) $384,000 Setting up machines (setups) 255,840 Parts administration (part types) 345,600 Total $985,440 Expected Activity Plain Fancy TotalDLHs9,000 15,000 24,000Setups1,032 936 1,968Part types624 240 864The manufacturing overhead that would be applied to a unit of Plain under the company's traditional costing system is closest to:
A. $11.73.
B. $19.94.
C. $3.20.
D. $8.21.
Answer: D
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