Question - Claire Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products.
|
Activity Pool
|
Department Costs
|
Cost Driver
|
|
Binding
|
$225,500
|
Number of units
|
|
Printing
|
779,000
|
Machine hours
|
|
Product design
|
172,200
|
Change orders
|
|
General
|
594,500
|
None
|
|
Total overhead costs
|
$1,771,200
|
|
Other information is as follows:
|
Tablets
|
Books
|
|
Units
|
62,500
|
20,000
|
|
Direct materials cost per unit
|
$2.80
|
$10.00
|
|
Direct labor cost per unit
|
$3.80
|
$7.80
|
|
Direct labor hours
|
25,000
|
16,000
|
|
Machine hours
|
125,000
|
120,000
|
|
Change orders
|
1,200
|
2,000
|
Calculate predetermined OH rate.
Determine the unit product cost for Tablets and Books using the traditional costing system.
Calculate ABC rates.
Determine the unit product cost for Tablets and Books using the activity-based costing system.
Show that General cost is the difference between the total overhead costs allocated to products under the traditional system and the total cost allocated to products under the activity-based costing system.