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 Volume Engineering modifications Number of customers Market price Product A $20 per unit 0.5 DLH per unit 0.4 MH per unit 200 batches 16,000 units 12 modifications 800 customers $60 per unit Product B $30 per unit 1.5 DLH per unit 1.2 MH per unit 360 batches 3,600 units 88 modifications 720 customers $240 per unit Costs The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows. Driver Indirect manufacturing Engineering support $ 53,600 Engineering modifications Electricity 53,600 Machine hours Setup costs 160,800 Batches Nonmanufacturing Customer service 136,800 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. Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Units Produced 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? 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 Electricity Setup Activity Driver Activity rate Total Overhead Cost Overhead Assigned 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 (35.99) (107.82) 4.1 How much gross profit is generated by each customer of Product A and Product B using ABC? Product A Product B Units purchased per customer Gross profit (loss) per customer 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? Method of product costing for better information
