ADA Pharmaceutical Company produces three drugs-Diomycin, Homycin, and Addolin-belonging to the analgesic (pain- killer) family of medication. Since its inception four years ago, ADA has used a direct labor hour-based system to assign manufacturing overhead costs to products. Eme Weissman, the president of ADA Pharmaceutical, has just read about activity-based costing in a trade journal. With some curiosity and interest, she asked her financial controller, Takedo Simon, to examine differences in product costs between the firm's current costing and activity-based costing systems. ADA has the following budget information for the year: Cost of direct materials Cost of direct labor Number of direct labor hours Number of capsules Diomycin $ 202,000 247,000 7,170 970,000 Homycin $ 262,000 231,000 6,770 497,000 Addolin $ 255,000 260,000 1,970 297,000 ADA has identified the following activities and cost drivers and has assigned them a total overhead cost of $198,500. Activity Budgeted Budgeted Cost Overhead Cost Driver Volume 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 Takedo selected the cost drivers with the following justifications: $ 15,700 1,570 35,700 1,170 45,700 15,700 50,100 51,300 1,035 630 $198,500 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 Part 1 (Algo) Diomycin 185 Homycin 585 Addolin 785 185 385 585 7,170 6,770 1,970 135 185 685 42 97 485 Required: 1. Use the firm's current direct labor hour-based costing system to calculate the unit cost of each product. 2. Use the activity-based costing system to calculate the unit cost of each product. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Use the firm's current direct labor hour-based costing system to calculate the unit cost of each product. (Round your intermediate calculations and final answers to two decimal places.) Direct Materials Direct Labor Overhead Total Cost Number of Capsules Cost per capsule Diomycin Homycin Addolin $ 202,000.00 $ 262,000.00 $ 255,000.00 $ 247,000.00 $ 231,000.00 $ 260,000.00 970,000 497,000 297,000 Help ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Ftrevecca.blackboard.com%252Fwebapps%252Fblackboard%252Fexecute%252Fblti%252Flaunch Return %253FreturnUrl%253D%25252Fwebapps%25252FBb-McGraw Hill-BB595a83118bf1e%25252Fapp%25252Funiversal %25252Ftools%25253Fcourse_id%25253D_79275_1#/activity/question-group/KEZASSBKEPvGrk4xlJBcD08ic45WtHxakfwYUAtQIV0ml9yFqMlv1_qCnRP4m8pdq_DBojuQWFaq9tdhHwySD291InVT06sv5HtAjzQYYOM G pre-index LERS G IntCrim Step 4: Pull... C Home G Freedom of Expres... Workflow Analytics... GOC go/goc-intranet-us Home - Workday Updated GOC US C... G Life of a Matter - He... Calculator: Add to o... mo GAIA - Moma Search G LIS GOC Help Cente... [Confirmed Main Co... G IntCrim Step 3: Inde... + Copy of Copy of Co... M Question 2 - Project Two (Parts + Project Two (Parts 1, 2, 3 & 5) i 2 24 points eBook References Mc Graw Hill Required information Problem 5-45 (Algo) Volume-Based Costing versus ABC [LO 5-1, 5-3, 5-5] [The following information applies to the questions displayed below.] ADA Pharmaceutical Company produces three drugs-Diomycin, Homycin, and Addolin-belonging to the analgesic (pain- killer) family of medication. Since its inception four years ago, ADA has used a direct labor hour-based system to assign manufacturing overhead costs to products. Eme Weissman, the president of ADA Pharmaceutical, has just read about activity-based costing in a trade journal. With some curiosity and interest, she asked her financial controller, Takedo Simon, to examine differences in product costs between the firm's current costing and activity-based costing systems. ADA has the following budget information for the year: Cost of direct materials Cost of direct labor Number of direct labor hours Number of capsules 260,000 Diomycin Homycin Addolin $ 202,000 $ 262,000 $ 255,000 247,000 231,000 7,170 970,000 6,770 497,000 1,970 297,000 ADA has identified the following activities and cost drivers and has assigned them a total overhead cost of $198,500. Budgeted Budgeted Cost Activity Machine setup Plant management Supervision of direct labor Quality inspection Order expediting Cost Driver Setup hours Number of Workers Direct labor hours Inspection hours Customers served Total overhead Takedo selected the cost drivers with the following justifications: Overhead Cost Driver Volume $ 15,700 1,570 35,700 1,170 45,700 15,700 50,100 1,035 51,300 630 $198,500 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 Diomycin 185 Homycin Addolin 585 785 Number of workers 185 385 585 Direct labor hours 7,170 6,770 1,970 Inspection hours 135 Customers served 42 185 97 685 485 Part 1 (Algo) Required: 1. Use the firm's current direct labor hour-based costing system to calculate the unit cost of each product. 2. Use the activity-based costing system to calculate the unit cost of each product. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Use the activity-based costing system to calculate the unit cost of each product. (Round intermediate calculations to 2 decimal places. Round "Cost per capsule" to 2 decimal places.) Homycin Addolin 255,000.00 202,000.00 $ 262,000.00 $ 247,000.00 $ 231,000.00 $ 260,000.00 Diomycin Direct Materials $ Direct Labor $ Overhead Total Cost Number of Capsules Cost per capsule 970,000 497,000 297,000 < Required 1 Required 2 > Saved < Prev 2 of 4 Next > Save & Exit Submit All Bookmarks Jul 11 7:16