Problem - Jonson and Associates 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, B21P and O11L, about which it has provided the following data:
|
|
B21P
|
O11L
|
|
Direct materials per unit
|
$21.10
|
$47.30
|
|
Direct labor per unit
|
$16.80
|
$37.80
|
|
DLHs per unit
|
0.80
|
1.80
|
|
Annual production
|
45,000
|
10,000
|
The Company's estimated total manufacturing overhead for the year is $2,870,100 and the company's estimated total direct labor-hours for the year is 54,000.
The company is considering using a variation of ABC to determine its unit product costs for external reports. Data for this proposed ABC system appear below:
|
Activities and Activity Measures
|
Estimated Overhead Cost
|
|
Assembling products (DLHs)
|
$1,404,000
|
|
Preparing batches (batches)
|
429,300
|
|
Milling (MHs)
|
1,036,800
|
|
Total
|
$2,870,100
|
|
Activities
|
B21P
|
O11L
|
Total
|
|
Assembling products (DLHs)
|
36,000
|
18,000
|
54,000
|
|
Preparing batches (batches)
|
972
|
1,890
|
2,862
|
|
|
|
|
|
Milling (MHs)
|
1,728
|
864
|
2,592
|
On the basis of the given data, complete the following:
Determine the unit product cost of each of the company's two products under the traditional costing system.
Determine the unit product cost of each of the company's two products under ABC system.