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8. Samsung Group is considering a change to activity-based product costing. The company produces two products, mobile phones and tablet PCs, in a single production
8. Samsung Group is considering a change to activity-based product costing. The company produces two products, mobile phones and tablet PCs, in a single production department. The production department is estimated to require 3,750 direct labor hours. The total indirect labor is budgeted to be $375,000. Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time supporting actual production. The following information about mobile phones and tablet PCs was determined from the corporate records: Product Number of Setups Direct Labor Hours Units Mobile Phones 700 1,875 93,750 Tablet PCs 1,600 1,875 93,750 Total 2,300 3,750 187,500 a. Determine the indirect labor cost per unit allocated to mobile phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base. b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activitiesone for setup and the other for production support. c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing. d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)
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