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 $13 per unit 0.4 DLH per unit 0.3 MH per unit 95 batches 10,000 units 10 modifications 500 customers $35 per unit Product B $25 per unit 1.6 DLH per unit 1.2 MH per unit 190 batches 2,000 units 50 modifications 400 customers $120 per unit The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows. Costs Driver Indirect manufacturing Engineering support Electricity Setup costs Nonmanufacturing Customer service $ 24,000 Engineering modifications 27,000 Machine hours 42,000 Batches 72,000 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. 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? 0 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 01 Electricity 01 Setup OL Overhead Assigned Activity Driver Activity rate Total Overhead Cost Product A Engineering support Electricity Setup $ 0 Product B Engineering support Electricity Setup $ 0 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 (24.30) (87.00) 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
