Question
Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $636,400, consisting of the following activity
Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $636,400, consisting of the following activity cost pools for the current month:
Activity Centers Activity Costs
Assembly setups 132,000
Materials handling 64,800
Assembly 360,000
Maintenance 79,600
Total: 206,700
Cost Drivers Activity Level
Setup hours 2,000
Number of moves 600
Assembly hours 18,000
Maintenance hours 1,990
Total direct labor hours used during the month were 14,800. Panasonic produces many different electronic products, including the following two products produced during the current month.
Model X301 Model Z205
Units produced $2,000 $2,000
Direct materials costs $27,000 $27,000
Direct labor costs $22,000 $22,000
Direct labor hours 700 700
Setup hours 60 120
Materials moves 25 50
Assembly hours 900 900
Maintenance hours 20 80
Calculate the total per unit cost of each model using direct labor hours to assign manufacturing overhead to products.
Calculate the total per-unit cost of each model using activity-based costing to assign manufacturing overhead to products.
Comment on the accuracy of the two methods for determining product costs.
Discuss some of the strategic implications of your answers to the previous requirements.
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