Question: Your firm makes both widgets and gadgets. Information regarding these products is as follows:
|
|
Widgets
|
Gadgets
|
|
Direct materials per unit
|
$60.00
|
$45.00
|
|
Direct labor per unit
|
$9.60
|
$7.20
|
|
Direct labor-hours per unit
|
0.8 DLHs
|
0.6 DLHs
|
|
Estimated annual production
|
10,000 units
|
70,000 units
|
Your firm has a traditional costing system in which manufacturing overhead is applied to units based upon direct labor-hours. Information concerning manufacturing overhead and direct labor-hours for the upcoming year appears below:
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Estimated total manufacturing overhead
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$290,000
|
|
Estimated total direct labor hours
|
50,000 DLHs
|
REQUIRED:
[A] Calculate the full unit product costs for Widgets and Gadgets using the traditional costing system.
Your firm is considering replacing its traditional costing system for estimating unit product costs with an activity-based costing system. The ABC system would have the given three activity cost pools:
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Activities
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Activity Measures
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Estimated Overhead Cost
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Expected activity widgets
|
Expected activity gadgets
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Expected total activity
|
|
Direct labor
|
Direct labor hours
|
$150,000
|
8,000
|
42,000
|
50,000
|
|
Batch setups
|
Setups
|
$60,000
|
200
|
50
|
250
|
|
Safety testing
|
Number of tests
|
$80,000
|
80
|
20
|
100
|
|
Total manufacturing overhead costs
|
|
$290,000
|
|
|
|
[B] REQUIRED:
Calculate the full unit product costs for Widgets and Gadgets using the ABC system.