Question - Traditional Product Costing versus Activity-Based Costing
Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $198,000, consisting of the following activity cost pools for the current month:
|
Activity Centers
|
Activity Costs
|
Cost Drivers
|
Activity Level
|
|
Assembly Setups
|
$45,000
|
Setup hours
|
1,500
|
|
Materials handling
|
15,000
|
Number of moves
|
300
|
|
Assembly
|
120,000
|
Assembly hours
|
12,000
|
|
Maintenance
|
18,000
|
Maintenance hours
|
1,200
|
|
Total
|
$198,000
|
|
|
Total direct labor hours used during the month were 8,000. Panasonic produces many different electronic products, including the following two products produced during the current month:
|
Model X301
|
Model Z205
|
|
Units produced
|
1,000
|
1,000
|
|
Direct materials costs
|
$15,000
|
$15,000
|
|
Direct labor costs
|
$12,500
|
$12,500
|
|
Direct labor hours
|
500
|
500
|
|
Setup hours
|
50
|
100
|
|
Materials moves
|
25
|
50
|
|
Assembly hours
|
800
|
800
|
|
Maintenance hours
|
10
|
40
|
a) Calculate the total per-unit cost of each model using direct labor hours to assign manufacturing overhead to products.
b) Calculate the total per-unit cost of each model using activity-based costing to assign manufacturing overhead to products.