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2 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
2 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: 8 00:36:24 Engineering (Engineering Hours) Manufacturing (Direct Labor Hours) Inspection (Batches) Cost $720,000 $907, 200 $336,000 Usage by Product A 2,800 420,000 4,800 Usage by Product B 7,200 420,000 2,200 Hayden manufactures 11,700 units of Product A and 5,850 units of Product B per month. 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 54 1. Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC? Product A Product B
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