Plantwide versus Departmental Rates, Product-Costing Accuracy: Activity-Based Costing

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

	Product Data
	Model A		Model B
Units produced per year	20,000		160,000
Prime costs	$150,000		$1,500,000
Direct labour hours	140,000		300,000
Machine hours	20,000		200,000
Production runs	40		60
Inspection hours	800		1,200
Maintenance hours	10,000		90,000
Overhead costs:
Setup costs	$270,000
Inspection costs	210,000
Machining	240,000
Maintenance	270,000
Total	$990,000

Required:

1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labour hours. In your calculations, round any intermediate rates to two decimal places and use in subsequent computations. Round you final answers to two decimal places.

Model A	$per unit
Model B	$ per unit

2. Using ABC costing, compute the total overhead costs for setup, inspections, machining, and maintenance for Model A and Model B. Then, compute the overhead cost per unit for Model A and Model B. For total costs, round your answers to the nearest dollar, if required. For overhead cost per unit, round to the nearest cent.

	Model A	Model B
Setups (in total dollars)	$	$
Inspections	$	$
Machining	$	$
Maintenance	$	$
Overhead per unit	$	$

1.. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1 (machine intensive) with a rate of $3.50 per machine hour and Department 2 (labour intensive) with a rate of $0.90 per direct labour hour. The consumption of these two drivers is as follows:

	Department 1 Machine Hours		Department 2 Direct Labour Hours
Model A	10,000		130,000
Model B	170,000		270,000

Compute the overhead cost per unit for each product by using departmental rates. Round your answers to the nearest cent.

Model A	$per unit
Model B	$per unit