Boulware Products, Inc. produces printers for wholesale distributors. It has just completed packaging an order from Shawl Company for 450 printers. Before the order is shipped, the controller wants to compare the unit costs computed under the company's new activity-based costing system with the unit costs computed under its traditional costing system. Boulware's traditional costing system assigned overhead costs at a rate of 240 percent of direct labor cost.

Data for the Shawl order are as follows: direct materials, $17,552; purchased parts, $14,856; direct labor hours, 140; and average direct labor pay rate per hour, $17.

Data for activity-based costing related to processing direct materials and purchased parts for the Shawl order are as follows:

Required
1. Use the traditional costing approach to compute the total cost and the product unit cost of the Shawl order.
2. Using the cost hierarchy, identify each activity as unit level, batch level, product level, or facility level.
3. Prepare a bill of activities for the activity costs.
4. Use ABC to compute the total cost and product unit cost of the Shawl order.
5. What is the difference between the product unit cost you computed using the traditional approach and the one you computed using ABC? Does the use of ABC guarantee cost reduction for every order?

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Cost Driver Engineering hours Number of sctups Activity Cost Rate Activity Usage Engineering systems design Seeup $28 per engineering 18 engineering hours bour S36 per serup 12 serups Pars producion Machine hours S37 per machine 82 machine hour hours Product assembly Assembly hours $42 per assembly 96 assembly hoaur hours Number of packages Machine hours S5.60 per package 150 packages Building occupanky S10 per machine 82 machine hour hours