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Harwell, Inc. produces two different products, Product A and Product B. Harwell uses a traditional volume-based costing system in which direct labor hours are the
Harwell, Inc. produces two different products, Product A and Product B. Harwell uses a traditional volume-based costing system in which direct labor hours are the allocation base. Harwell is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Setup, Production, and Finishing. The cost of each activity and usage of the activity drivers are as follows: Setup (Batches) Production (Direct Labor Hours) Finishing (Machine Hours) Cost $ 61,000 $322,000 $ 72,000 Usage by Product A 260 54,500 42 Usage by Product B 240 54,500 58 Harwell manufactures 10,000 units of Product A and 15,750 units of Product B per month. Required: a. Calculate the predetermined overhead rate under the traditional costing system. (Round your answer to 2 decimal places.) Predetermined Overhead Rate b. Calculate the activity rate for Setup. (Round your answer to 2 decimal places.) Activity Rate per batch c. Calculate the activity rate for Production. (Round your answer to 2 decimal places.) Activity Rate per hour d. Calculate the activity rate for Finishing. Activity Rate per hour e. Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Indirect Manufacturing Cost per unit f. Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Indirect Manufacturing Cost per unit g. Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Indirect Manufacturing Cost per unit g. Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Indirect Manufacturing Cost per unit h. Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Indirect Manufacturing Cost per unit i. Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC? Product A Product B
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