Plantwide, department, and activity cost rates. (CGA, adapted) The bayther Company man¬

ufactures and sells two products, A and B. The manufacturing activity is organized in two depart¬

ments. Manufacturing overhead costs at its Calgary plant are allocated to each product using a plantwide rate of $20.40 per direct manufacturing labour-hour. This rate is based on budgeted manufacturing overhead of $408,000 and 20,000 budgeted direct manufacturing labour-hours:

Manufacturing Department Budget Manufacturing Overhead Budgeted Direct Manufacturing Labour-Hours 1 $288,000 10,000 2 120,000 10,000 Total $408,000 20,000 The number of direct manufacturing labour-hours required to manufacture each product is:

Manufacturing Department Product A Product B 1 4 1 2 1 4 Total 5 5 Per unit costs for the two categories of direct manufacturing costs are:

Direct Manufacturing Costs Product A Product B Direct materials costs $144 $180 Direct manufacturing labour costs 96 96 At the end ofthe year, there was no work in process. There were 200 finished units ofproduct A and 600 finished units of product B on hand. Assume that the budgeted production level of the Calgary plant was exactly attained.

bayther sets the listed selling price of each product by adding 120% to its unit manufac¬

turing costs; that is, if the unit manufacturing costs are $100, the listed selling price is $220

($100 + $120). This 120% markup is designed to cover costs upstream to manufacturing (for example, product design) and costs downstream from manufacturing (for example, marketing and customer service) as well as to provide an operating income.

Required 1. What is the manufacturing cost included in the inventory of products A and B if bayther uses

(a) a plantwide overhead rate and

(b) department overhead rates?

What difference would result in the per unit selling prices of product A and product B from using a plantwide overhead rate instead of department overhead rates?

bhould bayther Company prefer plantwide or department manufacturing over¬

head rates?

4. Under what conditions should Sayther Company further subdivide the department cost . ~\ pools into activi Ly--cost pools?