Inc. manufactures and distributes three types of water skis: beginner, intermediate, and advanced. Production is highly automated for the beginner model, whereas the intermediate and advanced models require increasing degrees of labour, depending on the shaping and finishing processes. Oriole applies all indirect costs to production using a single predetermined overhead (OH) rate based on direct labour hours (DLH). Management estimates that 24,600 DLH will be used in the upcoming year, at a rate of $12 per hour. Assume that the following activity took place in the first month of the new year:

		Beginner		Intermediate		Advanced
Number of units produced		16,400		6,600		2,500
Direct materials costs		$17,100		$10,700		$6,600
Direct labour hours		400		800		1,600
Number of orders		6		4		3
Number of production runs		2		2		3
Kilograms of material used		6,600		2,600		1,200
Machine hours		1,000		250		160
Number of inspections		3		3		3
Number of units shipped		14,800		6,200		2,100

A consultant recently suggested that Oriole switch to an activity-based costing system, and assembled the following information:

Activities		Recommended Cost Drivers		Estimated OH Cost					Cost Drivers
Order processing		Number of orders			$	49,000			100		orders
Material handling		Kilograms of materials used				490,000			98,000		kilograms
Machine depreciation and maintenance		Machine hours				336,000			16,000		hours
Quality control		Number of inspections				109,000			40		inspections
					$	984,000

Calculate the production costs for each product in the first month of the upcoming year, using direct labour hours as the allocation base.

		Beginner		Intermediate		Advanced
Materials		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Labour		enter a dollar amount		enter a dollar amount		enter a dollar amount
MOH		enter a dollar amount		enter a dollar amount		enter a dollar amount
		$enter a total amount		$enter a total amount		$enter a total amount

Calculate the production costs for each product in the first month of the upcoming year, using activity-based costing.

		Beginner		Intermediate		Advanced
Materials		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Labour		enter a dollar amount		enter a dollar amount		enter a dollar amount
ABC overhead applied		enter a dollar amount		enter a dollar amount		enter a dollar amount
		$enter a total amount		$enter a total amount		$enter a total amount

Compare your answers in parts (a) and (b). Is the overhead charged to each product the same under each method?

The amount charged to each product for overhead is select an option differentthe same under the two methods.