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	$	14 per unit		$	25 per unit
Direct labor hours		0.4 DLH per unit			1.6 DLH per unit
Machine hours		0.3 MH per unit			1.2 MH per unit
Batches		115 batches			230 batches
Volume		10,000 units			2,000 units
Engineering modifications		8 modifications			40 modifications
Number of customers		500 customers			400 customers
Market price	$	35 per unit		$	95 per unit per unit

The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.

	Costs			Driver
Indirect manufacturing
Engineering support	$	25,500		Engineering modifications
Electricity		21,600		Machine hours
Setup costs		41,000		Batches
Nonmanufacturing
Customer service		75,000		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.)

4.2 Is the gross profit adequate for each customer of Product A and B using ABC?
		Product A	Product B
Gross profit (loss) 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?

• Activity-based costing method

• Plantwide overhead rate method

• Departmental overhead rate method