Activity-Based Costing Versus Traditional Approach, Problem 40.

40. Activity-Based Costing Versus Traditional Approach. Carson Company produces a regular computer monitor that sells for $175 and a premium computer monitor iat sells for $300. Last year, total overhead costs of $3,675,000 were allocated hased on direct labor hours. A total of 63,000 direct labor hours were required last year to build 36,000 regular monitors (1.75 hours per unit), and 42,000 direct labor hours were required to build 12,000 premium monitors {3.50 hours per unit}. Total direct labor and direct materials costs for last year were as follows: Regular Monitor Premium Monitor Direct materials $1,908,000 $ 900,000 Direct labor $1,723,000 $1, 200,000 The management of Carson Company would like 11} use activitybased coating to allocate overhead rather than one plantwide rate based on direct labor hours. The following estimates are for the activilies and related cost drivers idened as having the greatest impact on overhead costs. Required: a. Calculate 1l1e direct materials cost per unit and direct labor cost per unit for each product. h. 1. Using the plantwide allocation method, calculate the predetermined overhead rate and determine the overhead. cost per unit allocated. to the regular and premium monitors. 2. Using the plantwide allocation method, calculate the product cost per unit for the regular and premium monitors. Round results to the nearest cent. 1. Using the activity-based costing allocation method, calculate the predetermined overhead rate for each acvity. (Hint: Step 1 through step 3 in the activity-based costing process have already been done for you; this is step 4.) 2. Using the acthdty-based costing allocation method, allocate overhead to each product. (Hint: This is step 5 in the activitybased costing process} Determine the overhead cost per unit. Round results to the nearest cent. 3. 1E'V'hat is the product cost per unit for the regular and premium monitors? d. Calculate the per unit prot for each product using the plantwide approach and the activitybased costing approach. e. How much did the profit per unit change for each product when moving from the plantwide approach to the activity- based costing approach? 1What caused this change