Question
Part E: Activity-Based Costing Welk Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead
Part E: Activity-Based Costing
Welk Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, H16Z and P25P, about which it has provided the following data:
| H16Z | P25P |
Direct materials per unit ................ | $10.20 | $50.50 |
Direct labor per unit ...................... | $8.40 | $25.20 |
Direct labor-hours per unit ............ | 0.40 | 1.20 |
Annual production ......................... | 30,000 | 10,000 |
The companys estimated total manufacturing overhead for the year is $1,464,480 and the companys estimated total direct labor-hours for the year is 24,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity Measures | Estimated Overhead Cost | ||||
Supporting direct labor (DLHs) ................. | $ 552,000 |
| |||
Setting up machines (setups) | ..................... | 132,480 |
| ||
Parts administration (part types) ................ |
| 780,000 |
| ||
Total ........................................................... |
| $1,464,480 |
| ||
| H16Z | P25P | Total | ||
Supporting direct labor ...... | 12,000 | 12,000 | 24,000 |
| |
Setting up machines ........... | 864 | 240 | 1,104 |
| |
Parts administration ........... | 600 | 960 | 1,560 |
| |
Required:
- Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system.
- Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started