Activity Machine setup Plant management Supervision of direct labor Quality inspection Order expediting Total overhead Cost Driver Setup hours Number of Workers Direct labor hours Inspection hours Customers served Budgeted Overhead Cost $ 16,100 36,100 46,100 50,500 51,700 $200,500 Budgeted Cost Driver Volume 1,610 1,210 16,100 1,055 650 Takedo selected the cost drivers with the following justifications: SETUP HOURS: The cost driver of setup hours is used because the same product takes about the same amount of setup time regardless of size of batch. For different products, however, the setup time varies. NUMBER OF WORKERS: Plant management includes plant maintenance and corresponding managerial duties that make production possible. This activity depends on the number of workers. The more workers involved, the higher the cost. DIRECT LABOR HOURS: Supervisors spend their time supervising production. The amount of time they spend on each product is proportional to the direct labor hours worked. INSPECTION HOURS: Inspection involves testing a number of units in a batch. The time varies for different products but is the same for all similar products. NUMBER OF CUSTOMERS SERVED: The need to expedite production increases as the number of customers served by the company increases. Thus, the number of customers served by ADA is a good measure of expediting production orders. Takedo gathered the following information about the cost driver volume for each product: Setup hours Number of workers Direct labor hours Inspection hours Customers served Diomycin 205 205 7,210 155 46 Homycin 605 405 6,810 205 101 Addolin B05 605 2,010 705 505 Required: 1. Use the firm's current costing system to calculate the unit cost of each product. 2. Use the activity-based cost system to calculate the unit cost of each product. Required 1 Required 2 Use the firm's current costing system to calculate the unit cost of each product. (Round intermediate calculations places. Round "Cost per capsule" to 2 decimal places.) $ Diomycin 206,000.00 $ 251,000.00 $ Homycin 266,000.00 $ 235,000.00 $ Addolin 259,000.00 264,000.00 $ Direct Materials Direct Labor Overhead Total Cost Packets produced Cost per capsule $ $ 457,000.00 $ $ 1,010,000.00 $ 501,000.00 $ 501,000.00 $ 523,000.00 301,000.00 Required 1 Required 2 Use the activity-based cost system to calculate the unit cost of each product. (Round intermediate calculations to 2 decir places. Round "Cost per capsule" to 2 decimal places.) $ $ Diomycin Homycin 206,000.00 $ 266,000.00 $ 251,000.00 $ 235,000.00 $ Addolin 259,000.00 264,000.00 Direct Materials Direct Labor Overhead Total Cost Packets produced Cost per capsule $ 457,000.00 $ $ 1,010,000.00 $ 501,000.00 $ 501,000.00 $ 523,000.00 301,000.00
