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	135,000	300,000
Machine hours	21,000	195,000
Production runs	50	70
Inspection hours	700	1,200
Maintenance hours	8,000	92,000
Overhead costs:
Setup costs	$300,000
Inspection costs	209,000
Machining	496,000
Maintenance	300,000
Total	$1,305,000

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 5b64f3081021fda_1 per DLH.

Model A:	$ overhead cost per unit
Model B:	$ 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:	$ overhead cost per unit
Model B:	$ overhead cost per unit

Note: Be sure to complete both tables below.

Activity	Driver	Activity Rate
Setups
Inspections
Machining
Maintenance

Overhead assignment
	Model A	Model B
Setups
Inspections
Machining
Maintenance
Total overhead
Units produced
Overhead per unit

3. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1: (machine intensive) with a rate of $3 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	8,000	134,000
Model B	170,000	260,000

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