Problem 17-1A Comparing costs using ABC with the plantwide overhead rate LO P1, P3, A1, A2 The following data are for the two products produced by Tadros Company Product A Product B Direct materials S 14 per unit $ 28 per unit Direct labor hours 03 DLH per unit 16 DLH per unit Machine hours 0.2 MH per unit 12 MH per unit Batches 110 batches 220 batches Volume 10,000 units 2.000 units Engineering modifications 9 modifications 45 modifications Number of customers 500 customers 400 customers Market price $ 34 per unit $95 per unit The company's direct labor rate is $20 per direct labor hour (DLH) Additional information follows. Costs Driver Indirect manufactuning Engineering support Electricity Setup costs Nonmanufacturing Customer service $ 26,000 Engineering modifications 17,600 Machine hours 41,000 Batches 73,000 Number of customers Required: (Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts should be indicated with minus sign.) 1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. 0 Overhead Assigned Plantwide OH rate Total Overhead Cost Units Produced Activity Driver 4,000 OH Cost per unit Product A Product B Product A Product B 1.2 What is the gross profit per unit? Product A Product B Market price Gross profit per unit 2.1 How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate? Product A Product B Gross profit per unit Units purchased per customer Gross profit per customer 2.2 What is the cost of providing customer service to each customer? 0 Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate? Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate? Product A Product B Gross profit per customer Customer service cost per customer Profit (loss) per customer Is the profit adequate? 3.1 Determine the manufacturing cost per unit of each product line using ABC. Engineering Support 0 Electricity Setup Overhead Assigned Activity Driver Activity rate Total Overhead Cost Product A Engineering support Electricity Setup $ Product B Engineering support Electricity Setup Product A Product B Total manufacturing costs Direct Materials per unit Direct Labor per unit Overhead per unit Total manufacturing cost per unit 3.2 What is the gross profit per unit? Product A Product B Market price (22.50) Ya 30) 4.1 How much gross profit is generated by each customer of Product A and Product Busing ABC? Product A Product B 0 Units purchased por customer Gross profit (los) por customer 42 Is the gross profit adequate for each customer of Product A and B using ABC? Product A Product B Gross profit (los) per customer Customer service cost per customer Profit (loss) per customer Is the profit adequate using ABC? 5. Which method of product costing gives better information to managers of this company? O Departmental overhead rate method Plantwide overhead rate method Activity based costing method
