Perdon Corporation manufactures safeslarge mobile safes, and large walk-in sta- tionary bank safes. As part of its annual budgeting process, Perdon is analyzing the profit- ability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The following information relates to overhead.

Mobile Safe Walk-In Safes

Units planned for production 200 50

Material moves per product line 300 200

Purchase orders per product line 450 350

Direct labor hours per product line 800 1,700

Instructions

(a) The total estimated manufacturing overhead was $260,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to:

(1) One mobile safe?

(2) One walk-in safe?

(b) The total estimated manufacturing overhead of $260,000 was comprised of $160,000 for materials handling costs and $100,000 for purchasing activity costs. Under activity-based costing (ABC):

(1) What amount of materials handling costs are assigned to:

(a) One mobile safe?

(b) One walk-in safe?

(2) What amount of purchasing activity costs are assigned to:

(a) One mobile safe?

(b) One walk-in safe?

(c) Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABC.

(a) Traditional Costing

Traditional Costing Formula: (Total Cost / Total Hours) = $ rate per DLH (direct labor hour)

(a1) ONE MOBILE safe overhead cost is:

(Direct Labor Hours x Rate per DLH) then divided by ???

(a2) ONE WALK-IN safe overhead cost is:

(b) Activity Based Costing

A-B-C Formula for Materials: (Total Material Handling Cost / Total # Moves) = $ per move

(1a) ONE MOBILE safe materials cost is:

(1b) ONE WALK-IN safe materials cost is:

A-B-C Formula for Purchasing Activites:

(2a) ONE MOBILE safe purchasing activities cost is:

(2b) ONE WALK-IN safe purchasing activities cost is:

(c) Comparison: Traditional vs Activity-Based Costing

UNIT Costs	Traditional Costing	Activity Based Costing
Mobile Safe
Walk-in Safe