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 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: Product Data Model A Model B Units produced per year 10,000 100,000 Prime costs $151,000 $1,510,000 Direct labor hours 144,000 300,000 Machine hours 19,000 205,000 Production runs 50 60 Inspection hours 600 1,100 Maintenance hours 11,000 89,000 Overhead costs: Setup costs $297,000 Inspection costs 187,000 Machining 104,000 Maintenance 300,000 Total $888,000 Required: 1. 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: $fill in the blank 817e370c4027ff0_1 per DLH. Model A: $fill in the blank 817e370c4027ff0_2 overhead cost per unit Model B: $fill in the blank 817e370c4027ff0_3 overhead cost per unit 2. Compute the overhead cost per unit for each product by using ABC. (Round rates and unit overhead costs to two decimal places.) Model A: $fill in the blank a63a16fd5fd101f_1 overhead cost per unit Model B: $fill in the blank a63a16fd5fd101f_2 overhead cost per unit Note: Be sure to complete both tables below. Activity Driver Activity Rate Setups $fill in the blank a63a16fd5fd101f_4 per Inspections $fill in the blank a63a16fd5fd101f_7 per Machining $fill in the blank a63a16fd5fd101f_10 per Maintenance $fill in the blank a63a16fd5fd101f_13 per Overhead assignment Model A Model B Setups $fill in the blank a63a16fd5fd101f_15 $fill in the blank a63a16fd5fd101f_16 Inspections fill in the blank a63a16fd5fd101f_17 fill in the blank a63a16fd5fd101f_18 Machining fill in the blank a63a16fd5fd101f_19 fill in the blank a63a16fd5fd101f_20 Maintenance fill in the blank a63a16fd5fd101f_21 fill in the blank a63a16fd5fd101f_22 Total overhead $fill in the blank a63a16fd5fd101f_23 $fill in the blank a63a16fd5fd101f_24 Units produced fill in the blank a63a16fd5fd101f_25 fill in the blank a63a16fd5fd101f_26 Overhead per unit $fill in the blank a63a16fd5fd101f_27 $fill in the blank a63a16fd5fd101f_28 3. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1: (machine intensive) with a rate of $4 per machine hour and Department 2: (labor intensive) with a rate of $1 per direct labor hour. The consumption of these two drivers is as follows: Department 1 Machine Hours Department 2 Direct Labor Hours Model A 9,000 132,000 Model B 180,000 290,000 Compute the overhead cost per unit for each product by using departmental rates. (Round to two decimal places.) Model A: $fill in the blank 672596003fdc013_1 per unit Model B: $fill in the blank 672596003fdc013_2 per unit 4. CONCEPTUAL CONNECTION Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the departmental rates do better than the plantwide rate? A common justification is to use hours for machine-intensive departments and hours for labor-intensive departments. Using activity-based costs as the standard, we can say that departmental rates the accuracy of the overhead cost assignment for both products. The departmental rates cost A well the ABC method while the plantwide rate costs A well the ABC method. However, the rates of difference are very close. Looking at it this way, department costs are not clearly more wrong than the plantwide rate; they are wrong in a direction. The departmental rates do better than the plantwide rates.