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Digital Storage Concept Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single

Digital Storage Concept Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 3,750 direct labor hours. The total indirect labor is budgeted to be $375,000.

Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time supporting actual production.

The following information about cell phones and tablet PCs was determined from the corporate records:

Number of Setups Direct Labor Hours Units
Cell phones 600 1,875 93,750
Tablet PCs 1,400 1,875 93,750
Total 2,000 3,750 187,500
Required:
a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base.
Complete the Activity Tables for cell phones and tablets:
b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activitiesone for setup and the other for production support.*
c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.*
d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)?
* If required, round all per-unit answers to the nearest cent.

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