churchill company

Churchill Products is considering updating its cost system to an activity-based costing system and is interested in understanding the effects. The company's cost accountant has identified three overhead cost pools along with appropriate cost drivers for each pool Cost Pools Utilities Scheduling and setup Material handling Costs $265.000 290,000 780,000 Activity Drivers 53,000 machine-hours 580 setups 1.560.000 pounds of material The company manufactures three models of water basins (Oval, Round, and Square). The plans for production for the next year and the budgeted direct costs and activity by product line are as follows: Oval $ 80,000 25,000 Products Round $ 70.000 10,000 Total direct costs (material and labor) Total machine-hours Total number of setups Total pounds of material Total direct labor-hours Number of units produced 280 Square 5 80.000 18.000 220 790.000 5,500 5.000 510,000 3.000 4,000 260.000 1,500 1.800 Required: a. The current cost accounting system charges overhead to products based on direct labor-hours. What unit product costs will be reported for the three products if the current cost system continues to be used? (Do not round intermediate calculations Round "Per unit cost" answers to 2 decimal places.) Oval Round Square Total cost Per unit cost c. What are the cost driver rates for the three cost pools identified by the cost accountant? (Round your answers to 2 decimal places.) Utilities Scheduling and setup Material handling per machine hour per setup per pound d. What unit product costs will be reported for the three products if the ABC system suggested by the cost accountant's classification of cost pools is used? (Do not round intermediate calculations. Round "Per unit cost" answers to 2 decimal places.) Oval Round Square Total cost Per unit cost e. If management should decide to implement an activity-based costing system, what benefits should it expect? If management implemented an activity-based costing system it should be provided with a more thorough understanding of product costs If management implemented an activity-based costing system it will increase the sales of the company