Addy Company has two products: A and B. The annual production and sales of Product A is 2,350 units and of Product B is 1,750 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 0.7 direct labor-hours per unit. The total estimated overhead for next period is $106,000.
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 General Factory--with estimated overhead costs and expected activity as follows
| Activities |
Estimated Overhead
cost |
Expected Activity |
| Product A |
Product B |
Total |
| Activity 1 |
$32,754 |
1,650 |
1,250 |
2,900 |
| Activity 2 |
18,656 |
2,350 |
850 |
3,200 |
| General Factory |
54,590
|
940 |
1,225 |
2,165 |
| Total |
$106,000
|
|
Note: The General Factory 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?