34
17) Torri 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, B40W and C63J, about which it has
provided the following data:
B40W
C63J
Direct materials per unit
$
34.90
$
63.70
Direct labor per unit
$
20.80
$
62.40
Direct labor-hours per unit
0.80
2.40
Annual production (units)
35,000
15,000
The company’s estimated total manufacturing overhead for the year is $2,656,000 and the
company’s estimated total direct labor-hours for the year is 64,000.
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:
Activities and Activity Measures
Estimated
Overhead Cost
Assembling products (DLHs)
$
1,216,000
Preparing batches (batches)
480,000
Milling (MHs)
960,000
Total
$
2,656,000
Activities
B40W
C63J
Total
Assembling products
28,000
36,000
64,000
Preparing batches
2,304
2,496
4,800
Milling
1,088
2,112
3,200
Required:
a. Determine the unit product cost of each of the company’s two products under the traditional
costing system.
b. Determine the unit product cost of each of the company’s two products under activity-based
costing system.
35
36
37
18) Cabigas Corporation manufactures two products, Product C and Product D. The company
estimated it would incur $167,140 in manufacturing overhead costs during the current period.
Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning
the current period’s operations appear below:
Product C
Product D
Estimated volume
2,000
units
2,700
units
Direct labor per unit
2.00
hours
0.80
hour
Direct labor-hours per unit
$
21.50
$
24.10
Annual production (units)
$
24.00
$
9.60
Required:
a. Compute the predetermined overhead rate under the current method, and determine the unit
product cost of each product for the current year.
b. The company is considering using an activity-based costing system to compute unit product
costs for external financial reports instead of its traditional system based on direct labor-hours.
The activity-based costing system would use three activity cost pools. Data relating to these
activities for the current period are given below:
Expected Activity
Activity Cost Pool
Estimated Overhead
Costs
Product C
Product D
Total
Machine setups
$
13,630
130
190
290
Purchase orders
85,750
750
1,000
1,750
General Factory
67,760
4,000
2,160
6,160
Total
$
167,140
Determine the unit product cost of each product for the current period using the activity-based
costing approach. General factory overhead is allocated based on direct labor-hours.
38
39
40
19) Welk 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, H16Z and P25P, about which it has
provided the following data:
H16Z
P25P
Direct materials per unit
$
10.20
$
50.50
Direct labor per unit
$
8.40
$
25.20
Direct labor-hours per unit
0.40
1.20
Annual production (units)
30,000
10,000
The company’s estimated total manufacturing overhead for the year is $1,464,480 and the
company’s estimated total direct labor-hours for the year is 24,000.
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:
Activities and Activity Measures
Estimated Overhead Cost
Supporting direct labor (DLHs)
$
552,000
Setting up machines (setups)
132,480
Parts administration (part types)
780,000
Total
$
1,464,480
H16Z
P25P
Total
Supporting direct labor
12,000
12,000
24,000
Setting up machines
864
240
1,104
Parts administration
600
960
1,560
Required:
a. Determine the manufacturing overhead cost per unit of each of the company’s two products
under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company’s two products
under activity-based costing system.
43
20) Werger 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, W82R and L48S, about which it has
provided the following data:
W82R
L48S
Direct materials per unit
$
11.50
$
62.90
Direct labor per unit
$
2.00
$
13.00
Direct labor-hours per unit
0.20
1.30
Annual production (units)
45,000
10,000
The company’s estimated total manufacturing overhead for the year is $1,521,960 and the
company’s estimated total direct labor-hours for the year is 22,000.
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:
Activities and Activity Measures
Estimated
Overhead Cost
Supporting direct labor (DLHs)
$
352,000
Setting up machines (setups)
201,960
Parts administration (part types)
968,000
Total
$
1,521,960
Activities
W82R
L48S
Total
Supporting direct labor
9,000
13,000
22,000
Setting up machines
814
374
1,188
Parts administration
924
1,012
1,936
Required:
a. Determine the unit product cost of each of the company’s two products under the traditional
costing system.
b. Determine the unit product cost of each of the company’s two products under activity-based
costing system.
