3-442
205. Ermitanio, Inc., manufactures and sells two products: Product U8 and Product U1. Data
concerning the expected production of each product and the expected total direct labor-hours
(DLHs) required to produce that output appear below:
Expected Production Direct Labor-Hours Per Unit
Total Direct Labor-Hours
Product U8 900 9.0 8,100
Product U1 300 6.0 1,800
Total direct labor-hours 9,900
The direct labor rate is $18.50 per DLH. The direct materials cost per unit for each product is
given below:
Direct Materials Cost per Unit
Product U8 $260.60
Product U1 $107.30
The company is considering adopting an activity-based costing system with the following activity
cost pools, activity measures, and expected activity:
Estimated Expected Activity
Activity Cost Pools Activity Measures Overhead Cost Product U8
Product U1
Total
Labor-related DLHs $298,782 8,100 1,800 9,900
Product testing Tests 58,387 400 300 700
General factory MHs 339,008 3,300 3,100 6,400
$696,177
3-443
Required:
In all computations involving dollars in the following requirements, round off your answer to the
nearest whole cent.
a. The company currently uses a traditional costing method in which overhead is applied to
products based solely on direct labor-hours. Compute the company’s predetermined overhead
rate under this costing method.
b. How much overhead would be applied to each product under the company’s traditional costing
method?
c. Determine the unit product cost of each product under the company’s traditional costing
method.
d. Compute the activity rates under the activity-based costing system.
e. Determine how much overhead would be assigned to each product under the activity–based
costing system.
f. Determine the unit product cost of each product under the activity-based costing method.
g. What is the difference between the overhead per unit under the traditional costing method
and the activity-based costing system for each of the two products?
h. What is the difference between the unit product costs under the under the traditional costing
method and the activity-based costing system for each of the two products
3-447
206. Neldon, Inc., manufactures and sells two products: Product S3 and Product K2. Data
concerning the expected production of each product and the expected total direct labor-hours
(DLHs) required to produce that output appear below:
Expected Production Direct Labor-Hours Per Unit
Total Direct Labor-Hours
Product S3 800 8.0 6,400
Product K2 900 6.0 5,400
Total direct labor-hours 11,800
The direct labor rate is $18.00 per DLH. The direct materials cost per unit for each product is
given below:
Direct Materials Cost per Unit
Product S3 $280.70
Product K2 $157.90
The company is considering adopting an activity-based costing system with the following activity
cost pools, activity measures, and expected activity:
Estimated Estimated
Activity Cost Pools Activity Measures Overhead Cost Product S3
Product K2
Total
Labor-related DLHs $523,094 6,400 5,400 11,800
Machine setups Setups 135,478 600 800 1,400
General factory MHs 392,327 5,000 5,300 10,300
$1,050,899
3-448
Required:
In all computations involving dollars in the following requirements, round off your answer to the
nearest whole cent.
a. Determine the unit product cost of each product under the company’s traditional costing
method.
b. Determine the unit product cost of each product under the activity-based costing method.
3-451
207. Cabat Company manufactures two products, Product C and Product D. The company
estimated it would incur $177,910 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 3,800 units 3,000 units
Direct labor-hours per unit 1.20 hours 0.80 hour
Direct materials cost per unit $11.60 $23.70
Direct labor cost per unit $10.80 $7.20
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:
Estimated
Overhead Expected Activity
Activity Cost Pools
Costs Product C Product D
Total
Machine setups $12,190 110 120 230
Purchase orders 75,240 820 1,160 1,980
General factory 90,480 4,560 2,400 6,960
Total $177,910
3-452
Determine the unit product cost of each product for the current period using the activity-based
costing approach.
3-455
208. Rosman, Inc., manufactures and sells two products: Product Q1 and Product G2. Data
concerning the expected production of each product and the expected total direct labor-hours
(DLHs) required to produce that output appear below:
Expected
Production Direct
Labor-Hours
Per Unit
Total Direct
Labor-Hours
Product Q1 300 9.0 2,700
Product G2 400 6.0 2,400
Total direct labor-hours 5,100
The direct labor rate is $23.80 per DLH. The direct materials cost per unit for each product is
given below:
Direct Materials
Cost per Unit
Product Q1 $273.60
Product G2 $166.80
The company is considering adopting an activity-based costing system with the following activity
cost pools, activity measures, and expected activity:
Estimated Expected Activity
Activity Cost Pools Activity Measures Overhead Cost
Product Q1 Product G2 Total
Labor–related DLHs $94,656 2,700 2,400
5,100
Product testing Tests 69,608 600 800
1,400
General factory MHs 384,000 3,900 3,600
7,500
3-456
$548,264
Required:
What is the difference between the unit product costs under the under the traditional costing
method and the activity-based costing system for each of the two products?
3-460
209. Besser, Inc., manufactures and sells two products: Product D0 and Product S3. Data
concerning the expected production of each product and the
Expected Production Direct Labor-Hours Per Unit
Total Direct Labor-Hours
Product D0 800 5.0 4,000
Product S3 100 8.0 800
Total direct labor-hours 4,800
The direct labor rate is $24.70 per DLH. The direct materials cost per unit for each product is
given below:
Direct Materials Cost per Unit
Product D0 $136.60
Product S3 $162.60
The company is considering adopting an activity-based costing system with the following activity
cost pools, activity measures, and expected activity:
Estimated Expected Activity
Activity Cost Pools Activity Measures Overhead Cost Product D0 Product S3
Total
Labor-related DLHs $187,104 4,000 800 4,800
Production orders Orders 56,590 400 600 1,000
General factory MHs 339,560 3,400 3,100 6,500
$583,254