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 Direct materials Direct labor hours Machine hours Batches Volu Engineering modifications Number of customers Market price Product A $15 per unit 0.4 DLH per unit 2.3 MH per unit 115 batches 10,000 units 10 modifications 500 customers $35 per unit Product B 528 per unit 1.6 DLH per unit 1.2 per unit 230 batches 2.000 units se modifications 400 customers $120 per unit The company's direct labor rate is $20 per direct labor hour (DLH) Additional information follows. Driver Indirect manufacturing Engineering support Electricity Setup costs Hosanufacturing Customer service $23,500 21,000 41,000 Engineering nodifications Machine hours catches 74,000 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.) 3 Answer is not complete. Compute the manufacturing cost per uniting the plantwide overhead rate based on direct labor hour 1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. Activity Driver Plantwide OH rate Total Overhead Cost Units Produced Overhead Assigned Product A Product B OH Cost per unit Product A 23.00 4.78 $ Product B 60.00 % 19.14 27.78 79.14 12 What is the gross profit per unit? Product A Product B Market price 35.00 $ 120.00 Manufacturing cost per unit (27.78) (79.14) Gross profit per unit 722S 40.86 2. How much gross profit is generated by each customer of Product A and Product Busing the plantwide overhead rate Product A Product B Gross profit per unit 7.22 $ 40.86 Units purchased per customer 20 5 Gross profit per customer 144.00 204.00 2.2 What is the cost of providing customer service to each customer? Customer service costs $ 74.000 8222 per customer Number of customers 900 S US 2.2 What is the cost of providing customer service to each customer? Customer service costs 74.000 82.22 per customer Number of customers 900 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 $ 144.00 204.00 Customer service cost per customer 82 22 82 22 Profit (loss) per customer 61.78 121.78 Is the profit adequate? Yes 3.1 Determine the manufacturing cost per unit of each product line using ABC Engineering Support Customer service costs $ 26.000 0 Electricity Setup Overhead Assigned Activity Driver Activity rate Total Overhead Product A Engineering support Electricity Setup Total Overhead Cost Activity rate Activity Driver Overhead Assigned Product A Engineering support Electricity Setup Product B Engineering support Electricity Setup $ Total manufacturing costs Direct Materials per unit Direct Labor per unit Overhead per unit Total manufacturing cost per unit Product A 15.00 8.00 0.00 Product B 28.00 32.00 0.00 3.2 What is the gross profit per unit? $ Market price Manufacturing cost per unit Gross profit(loss) per unit Product A 35.00 (2596) 9.04 Product B 120.00 (88.26) 3174 Total manufacturing costs Direct Materials per unit Direct Labor per unit Overhead per unit Product A 15.00 8.00 $ Product B 28.00 3200 0.00 0.00 Total manufacturing cost per unit 3.2 What is the gross profit per unit? Product A Product B Market price 35.00 $ 120 00 Manufacturing cost per unit (25.96) (88.26) Gross profit(loss) per unit 904s 3174 4.1 How much gross profit is generated by each customer of Product A and Product Busina ABC? Product A Product B Gross profit(loss) per unit 9.04 31.74 Units purchased per customer 20 Gross profit (loss) per customer 181.00 $ 159.00 42 is the gross profit adequate for each customer of Product A and B using ABC Product A Product B Gross profit (loss) per customer 180.80 $ 158.70 Customer service cost per customer 82.22 82.22 Profit (loss) per customer 98.78S 76.78 Is the profit adequate using ABC? Yes 5. Which method of product costing gives better information to managers of this company? Method of product costing for better information Activity-based costing method 5
