Question
Handbrain 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.
Handbrain 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 4,000 direct labor hours. The total indirect labor is budgeted to be $571,200.
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 | 500 | 2,000 | 68,000 | |||||||
Tablet PCs | 1,100 | 2,000 | 68,000 | |||||||
Total | 1,600 | 4,000 | 136,000 |
If required, round your answers to the nearest cent.
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.
Cell phones | $ per unit |
Tablet PCs | $ per unit |
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.
Budgeted Activity Cost | Activity Rate | ||
Setup | $ | $ | per setup |
Production support | $ | $ | per direct labor hour |
c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.
Cell phones | $ per unit |
Tablet PCs | $ per unit |
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