Exercise 18-5

Perdon Corporation manufactures safeslarge mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead.

--------------------------------------------Mobile Safes ---------Walk-in Safes

Units planned for production ------200 -------------------------60

Material moves per product line --310------------------------ 190

Purchase orders per product line --450----------------------- 350

Direct labor hours per product line -800 -----------------------1,710

The total estimated manufacturing overhead was $277,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round answers to 2 decimal places, e.g. 12.25.)

(1)One mobile safe------- $_____________ per unit

(2)One walk-in safe------- $ _____________per unit

The total estimated manufacturing overhead of $277,000 was comprised of $166,000 for materials handling costs and $111,000 for purchasing activity costs. Under activity-based costing (ABC): (Round intermediate computations and final answers to 2 decimal places, e.g. 12.25.)

What amount of materials handling costs are assigned to:

(a)One mobile safe -----------$ ____________per unit

(b)One walk-in safe -----------$_____________ per unit

The total estimated manufacturing overhead of $277,000 was comprised of $166,000 for materials handling costs and $111,000 for purchasing activity costs. Under activity-based costing (ABC): (Round intermediate computations and final answers to 2 decimal places, e.g. 12.25.)

What amount of purchasing activity costs are assigned to:

(a)One mobile safe --------$ ___________per unit

(b)One walk-in safe____ $____________ per unit

Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABC. (Round answers to 2 decimal places, e.g. 12.25.)

Traditional Costing Activity-Based Costing

Mobile safe------------- $____________ $________________

Walk-in safe ------------$____________ $________________