PTech Ltd. manufactures two models of cordless phones. The Family Friend model has features designed for a multiple-user family, including the ability to have multiple ringtones and caller ID. The Office Assistant model is designed for use in home offices. Data regarding the two product lines are as follows:

PTech is considering implementing an activity-based costing (ABC) system in its plant and has identified four primary activities. Data on these activities are as follows:

REQUIRED
1. Calculate the manufacturing overhead allocation rate for each activity using ABC.
2. Compute the unit cost of each model of phone using ABC.
3. Assume the company currently allocates overhead on the basis of direct labour costs.
Compute the unit cost of each model of phone using this method.
4. Compare the unit costs of each model calculated in requirements 2 and 3. Comment on your results.

Transcribed Image Text:

Expected production Direct material cost Direct labour cost Family Friend 50,000 units S12.14 per unit S10.86 per unit Office Assistant 150,000 units S28.64 per unit $10.86 per unit Family Friend Office Assistant 30 setups Budgeted Cost 44,000 Machine processing 30,000 machine-hours 220,000 machine-hs S875,000 5,000 inspection-hours 0,000 inspection-hours S630,000 80,000 Equipment setup 50 setups Quality control Packaging/shipping 125 shipments 75 shipments