3-481
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.
3-484
214. Overmeyer, Inc., manufactures and sells two products: Product M8 and Product L9. 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 M8 400 5.0 2,000
Product L9 800 4.0 3,200
Total direct labor-hours 5,200
The direct labor rate is $21.70 per DLH. The direct materials cost per unit for each product is
given below:
Direct Materials Cost per Unit
Product M8 $213.20
Product L9 $145.40
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 M8
Product L9
Total
Labor-related DLHs $124,592 2,000 3,200 5,200
Machine setups Setups 50,139 500 400 900
General factory MHs 487,620 4,400 4,600 9,000
$662,351
3-485
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?
3-490
215. Gribbins, Inc., manufactures and sells two products: Product O1 and Product Z4. 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 O1 900 6.0 5,400
Product Z4 500 4.0 2,000
Total direct labor-hours 7,400
The direct labor rate is $23.00 per DLH. The direct materials cost per unit for each product is
given below:
Direct Materials Cost per Unit
Product O1 $248.20
Product Z4 $255.00
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 O1
Product Z4
Total
Labor-related DLHs $148,740 5,400 2,000 7,400
Machine setups Setups 49,399 300 400 700
General factory MHs 558,012 4,600 4,500 9,100
$756,151
3-491
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?
3-495
216. Swagg Jewelry Corporation manufactures custom jewelry. In the past, Swagg has been
using a traditional overhead allocation system based solely on direct labor-hours. Sensing that
this system was distorting costs and selling prices, Swagg has decided to switch to an activity–
based costing system using three activity cost pools. Information on these activity cost pools are
as follows:
Activity Cost Pool Estimated Overhead Cost
Expected Activity
Labor Related $40,000 8,000 direct labor-hours
Machine Related $50,000 12,500 machine hours
Quality Control $12,000 800 inspections
Job #309 incurred $900 of direct material, 30 hours of direct labor at $40 per hour, 80 machine
hours, and 5 inspections.
Required:
a. What is the cost of the job under the activity-based costing system?
b. Relative to the activity-based costing system, would Job #309 have been overcosted or
undercosted under the traditional system and by how much?
