16 Harwell, Inc. uses a traditional volume-based costing system in which direct labor hours are the allocation base. Harwell produces two different products: Product A, which uses 80,000 direct labor hours, and Product B, which uses 26,000 direct labor hours. Harwell is considering switching to an ABC system by splitting its manufacturing overhead cost of $825,000 across three activities: Setup, Production, and Finishing. Under the traditional volume-based costing system, the predetermined overhead rate is $8.25/direct labor hour. Under the ABC system, the cost of each activity and proportion of the activity drivers used by each product are as follows: Skipped Proportion used by Product A 308 40% 20% Total Cost $ 67,000 $ 337,000 $ 84,000 Design (Engineering Hours) Production Direct Labor Hours) Inspection (Batches) Proportion used by Product B 708 60% 80% Required: a. Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system. Indirect Manufacturing Costs b. Calculate the indirect manufacturing costs assigned to Product B under the traditional costing system, Indirect Manufacturing Costs c. Calculate the indirect manufacturing costs assigned to Product A under the ABC system. Indirect Manufacturing Costs d. Calculate the indirect manufacturing costs assigned to Product B under the ABC system. Indirect Manufacturing Costs e. Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC? Product A Product B 7 Hayden, Inc. produces two different products, Product A and Product B. Hayden uses a traditional volume-based costing system in which direct labor hours are the allocation base. Hayden is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Engineering, Manufacturing, and Inspection. The cost of each activity and usage of the activity drivers are as follows: Skipped Engineering (Engineering Hours) Manufacturing (Direct Labor Hours) Inspection (Batches) Cost $600,000 $800,000 $200,000 Usage by Product A 2,000 400,000 4,000 Usage by Product B 8,000 400,000 1,000 Hayden manufactures 10,000 units of Product A and 5,000 units of Product B per month. Required: a. Calculate the predetermined overhead rate under the traditional costing system. (Round your answer to 2 decimal places.) Predetermined Overhead Rate b. Calculate the activity rate for Engineering. Activity Rate per hour c. Calculate the activity rate for Manufacturing. (Round your answer to 2 decimal places.) Activity Rate per hour d. Calculate the activity rate for Inspection. Activity Rate per batch e. Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system. Indirect Manufacturing Cost per unit f. Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system. Indirect Manufacturing Cost per unit g. Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Indirect Manufacturing Cost per unit h. Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Indirect Manufacturing Cost per unit
