10. Green Systems specializes in servers for work-group, e-commerce. and enterprise resource planning (ERP) applications. The company's original job cost system has two direct cost categories: direct materials and direct labor. Overhead is allocated to jobs at the single rate of $25 per direct labor hour. A task force headed by Green's CFO recently designed an ABC system with four activities. The ABC system retains the current system's two direct cost categories. Thus, it budgets only overhead costs for each activity. Pertinent data follow: (Click on the icon to view ABC system data.) Green Systems has been awarded two new contracts that will be produced as Job A and Job B. Budget data relating to the contracts follow: 2(Click the icon to view the contract information.) Read the requirements Requirement 1. Compute the product cost per unit for each job using the original costing system (with two direct cost categories and a sin overhead allocation rate). Direct materials Direct labor Overhead allocated Total cost Job A Job B Divide by number of units Product cost per unit Requirement 2. Suppose Green Systems adopts the ABC system. Compute the product cost per unit for each job using ABC. Begin by computing the product cost per unit using ABC for Job A, then compute the product cost per unit for Job B. (Round your answer t the nearest cent.) Direct materials Direct labor Allocated overhead: Materials handling Machine setup Assembling Shipping Job A Job B Total cost Divide by number of units Product cost per unit Requirement 3. Which costing system more accurately assigns to jobs the costs of the resources consumed to produce them? Explain. First, compute each input per unit and compute the percentage of overhead assigned to Job A compared to Job B. (Round your numbers t two decimal places, XXXX. Round your percentage to the nearest whole percent.) Job A Direct labor hours per unit Parts per unit Setups per unit Assembling hours per unit Shipment per unit The single rate allocates all overhead costs based on (1) Job B % (Job A+ Job B) calculated in the preceding step, the single rate system assigned to each unit of Job A is assigned to each unit of Job B. % % Per the data you % of the overhead cost The activity-based costing system allocates overhead costs based on (2). The data you have calculated in the previous st shows that a unit of (3). actually consumes more of most overhead resources than a unit of (4) - The ABC system recognizes the actual resource consumption. The single rate undercosts (5). and overcosts (6). The activity-based costing system is (7). consumes. accurate than the single-rate system in assigning the costs of the resources each Requirement 4. A dependable company has offered to produce both jobs for Green for $5,100 per output unit. Green may outsource (buy from the outside company) Job A only, Job B only, or both jobs. Which course of action will Green's managers take if they base their decisi on (a) the original system? (b) ABC system costs? Which course of action will yield more income? Explain. a) If Green Systems' managers base their decision on original system costs, they will outsource (8). b) If Green Systems' managers base their decision on ABC system costs, they will outsource (9). 1: Data Table Activity Allocation Base Cost Allocation Rate Materials handling.... Number of parts Machine setup ....... Number of setups 0.60 490.00 Assembling Assembling hours 70.00 Number of shipments $ 1,440.00 2: Data Table Shipping.... 3: Requirements Job A Job B Number of parts... 15,000 5,000 Number of setups. 2 Number of assembling hours .... 1,500 500 Number of shipments. 1 1 Total direct labor hours 9,600 1,200 Number of output units 100 20 Direct materials cost... $ 211,000 $ 97,800 Direct labor cost. $ 165,000 $ 23,000 1. Compute the product cost per unit for each job using the original costing system (with two direct cost categories and a single overhe: allocation rate). 2. Suppose Green Systems adopts the ABC system. Compute the product cost per unit for each job using ABC. 3. Which costing system more accurately assigns to jobs the costs of the resources consumed to produce them? Explain. 4. A dependable company has offered to produce both jobs for Green for $5,100 per output unit. Green may outsource (buy from the outside company) Job A only. Job B only, or both jobs. Which course of action will Green's managers take if they base their decision (a) the original system? (b) ABC system costs? Which course of action will yield more income? Explain.