Plantwide versus Departmental Rates, Product$-$Costing Accuracy: Activity$-$Based Costing Overhead per unit

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Compute the overhead cost per unit for each product by using departmental rates. $($Round to two decimal places.$)$

Model A: $ per unit

Model B: $ per unit

A common justification is to use

Z hours for machine$-$intensive departments a

Z hours for labor$-$intensive departments. Using activity$-$based costs as the standard, we can say the department rates

$7?$ the accuracy of the overhead cost assignment for both

products and were less accurate than the plantwide rates. The departmental rates cost A well

the ABC method while the plantwide rate costs Product A wel

the ABC method. The departmental rates are not dramatically more wrong then the plantwide rate; however, they are

wrong in a

direction. The departmental rates

do better than the plantwide rates.

Ramsey Company produces speakers $($Model A and Model B$).$ Both products pass through two producing departments. Model A$\text{'}$s production is much more labor$-$intensive than that of Model B$.$ Model B is also the more popular of the two speakers. The following data has been gathered for the two products:

Line Item Description Product Data

Model A Product Data

Model B

Units produced per year $10,000100,000$

Prime costs $$150,000$ $$1,500,000$

Direct labor hours $140,000300,000$

Machine hours $20,000200,000$

Production runs $4060$

Inspection hours $8001,200$

Maintenance hours $10,00090,000$

Overhead costs:

Line Item Description Amount

Setup costs $$270,000$

Inspection costs $210,000$

Machining $240,000$

Maintenance $270,000$

Total $$990,000$Required:

Download Excel spreadsheet

Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. $($Round to two decimal places.$)$

Plantwide rate:

Model $A$: $

Model $B$: $ per $DLH.$

overhead cost per unit.

overhead cost per unit.

Compute the overhead cost per unit for each product by using ABC. $($Round rates and unit overhead costs to two decimal places.$)$

Note: Be sure to complete both tables below.