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HOR Activity Based Costing and Product Cost Distortion 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 actined to require 4,000 direct labor hours. The total Indirect laboris husgered to be $441,600. Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 50% of their time supporting actual production The following information about cell phones and tablet PCs was determined from the corporate recorde Number Direct of Labor Units Setups Hours Cell phones 500 2,000 92,000 Tablet PCS 1,100 2,000 92,000 Total 1,600 4,000 184.000 If required, round your answers to the nearest cent. Determine the indirect Inbor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct lahor hours as the sincation base Cell phones 2.40 per unit 2.40 per unit 1. Dutermine the budgeted activity costs and activity rates for the indirect labor under activity-based costing, Assume two activities - one for at and the other for produktion support. Budgeted Activity Cost Activity Rate Tablet PCS Check My Wirt Previous All work saved Emainstructor Save and Submitment for Grading C - 2 922 PM Ring eBook If required, round your answers to the nearest cent. a. Determine the Indirect labor cost per un 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 2.40 per unit Tablet PCs 2.40 per unit b. Determine the budgeted activity costs and activity rates for the indirect laborunder activity-based costing. Asume twin activities one for setup and the other for production support Budgeted Activity Cost Activity itate Setup 264,960 x 110.40 per vetup Production support 44.16 per direct labor hour c. Determine the activity cost per unit for indirect Inbor allocated to each product under activity-based costing Cell phones 2.8 X per unit Tablet PC 1.92 X per unit d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost signed to the products in (e) The parent indirect labar cousin (a) are distorted because setup activity is conuamed by the products in a different ratio from the direct labor. The activity-based costing method results in the product with the larger number of setups receiving a barger portion of the setup activity cost. The single rate system allocates overhead only on the bows of direct labor hours. Since the direct lubor hours are equal for each product, the allocated indirect labor will also be squal. Check My Work Previous Next >
