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Carter Company manufactures two products, Deluxe and Regular, and uses a traditional two-stage cost allocation system. The first stage assigns all factory overhead costs to
Carter Company manufactures two products, Deluxe and Regular, and uses a traditional two-stage cost allocation system. The first stage assigns all factory overhead costs to two production departments, A and B, based on machine hours. The second stage uses direct labor hours to allocate overhead to individual products. For the current year, the firm budgeted $1,150,000 total factory overhead cost. The $1,150,000 was for the planned levels of machine and direct labor hours shown in the following table. Machine hours Direct labor hours Production Department A 4,600 23,000 Production Department B 18,400 11,500 The following information relates to the firm's operations for the month of January: Units produced and sold Unit cost of direct materials Hourly direct labor wage rate Direct labor hours in Department A per unit Direct labor hours in Department B per unit Deluxe 230 $ 115 S 25 2 1 Regular 920 $57.50 $ 23 2 1 Carter Company is considering implementing an activity-based costing system. Its management accountant has collected the following information for activity cost analysis for the current year: Activity Material movement Machine setups Inspections Shipment Budgeted Overhead S 8,050 460,000 676,200 5,750 $1,150,000 Cost Driver Number of production runs Number of setups Number of units Number of shipments Budgeted Quantity 403.00 575 22,540 288.00 Driver Consumption Deluxe Regular 17.00 23 29.00 58.00 230 920 58.00 115 Required: 1. Calculate the unit cost for each of the two products under the existing volume-based costing system. (Round "Regular unit cost" to 2 decimal places.) 2. Calculate the overhead per unit of the cost driver under the proposed ABC system. (Do not round your intermediate calculations. Round your final answers to 2 decimal places.) 3. Calculate the unit cost for each of the two products if the proposed ABC system is adopted. (Do not round your intermediate calculations. Round your final answers to 2 decimal places.)
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