Kebort 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, U86Y and M91F, about which it has provided the following data:
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U86Y
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M91F
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|
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Direct materials per unit...........
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$19.80
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$45.80
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|
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Direct labor per unit.................
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$18.20
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$49.40
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|
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Direct labor-hours per unit.......
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0.70
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1.90
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|
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Annual production...................
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40,000
|
10,000
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The company's estimated total manufacturing overhead for the year is $2,541,760 and the company's estimated total direct labor-hours for the year is 47,000.
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:
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Activities and Activity Measures
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Estimated Overhead Cost
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Direct labor support (DLHs).............
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$1,175,000
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|
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Setting up machines (setups)............
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407,960
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|
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Part administration (part types)........
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958,800
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|
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Total..................................................
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$2,541,760
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|
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Expected Activity
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|
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U86Y
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M91F
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Total
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|
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DLHs...............
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28,000
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19,000
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47,000
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|
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Setups..............
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2,256
|
658
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2,914
|
|
|
Part types.........
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1,034
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2,162
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3,196
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1. The unit product cost of product U86Y under the company's traditional costing system is closest to:
A) $71.15
B) $55.50
C) $75.86
D) $38.00
2. The unit product cost of product M91F under the activity-based costing system is closest to:
A) $95.20
B) $121.57
C) $216.77
D) $197.95