Problem $1$

Texas Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor hours. The company has two products, W$82$R and L$485,$ about which it has provided the following data.

W$82$R

L$485$

Direct Material per unit

$$11\mathrm{.}50$

$$62\mathrm{.}90$

Direct Labor per unit

$$2\mathrm{.}00$

$$13\mathrm{.}00$

Direct Labor hours per unit

$0\mathrm{.}20$

$1\mathrm{.}30$

Annual production

$45,000$

$10,000$

The company's estimated total manufacturing overhead for the year is $$1,521,960$ and the company$$s estimated total direct labor hours for the year is $22,000.$

The company is considering using activity$-$based costing to determine its uni product costs. Data for the proposed activity$-$based costing system appear below.

Activities and Drivers

Estimated OH cost

Supporting direct labor $($DLH$)$

$$352,000$

Setting up machines $($setups$)$

$$201,960$

Parts administration $($part types$)$

$$968,000$

Total:

$$1,521,960$

Activities

W$82$R

L$485$

Total

Supporting DL

$9,000$

$13,000$

$22,000$

Setting up machines

$814$

$374$

$1,188$

Parts Admin.

$924$

$1,012$

$1,936$

Determine the unit product cost of each of the company$$s two products under the traditional costing system.

Determine the unit product cost of each of the company$$s two products under an activity$-$based costing system.