Problem 18-2 Activity-Based Costing Printware Products, Inc. produces printers for wholesale distributors. It has just completed packaging an order from Hawes Company for 450 printers. Before the order is shipped, the controller wants to compare the unit costs computed under the company's new activity-based costing system with the unit costs computed under its traditional costing system. Printware's traditional costing system assigned overhead costs at a rate of 240 percent of direct labor cost. Data for the Hawes order are as follows: direct materials, $17,552; purchased parts, $14,856; direct labor hours, 140; and average direct labor pay rate per hour, $17. Data for activity-based costing related to processing direct materials and purchased parts for the Hawes order follow. Activity Activity Usage 18 engineering hours 12 setups Cost Driver Activity Cost Rate Engineering systems design Setup Parts production Product assembly Packaging Building occupancy Engineering hours Number of setups Machine hours Assembly hours Number of packages Machine hours $ 28 per engineering hour $ 36 per setup $ 37 per machine hour $ 42 per assembly hour $ 5.60 per package $ 10 per machine hour 82 machine hours Required 82 machine hours 96 assembly hours 150 packages If required, round the per unit answers to the nearest cent. 1. Use the traditional costing approach to compute the total cost and the product unit cost of the Hawes order. Total cost Product unit cost 1. Use the traditional costing approach to compute the total cost and the product unit cost of the Hawes order. Total cost Product unit cost 2. Using the cost hierarchy, identify each activity as unit level, batch level, product level, or facility level. Engineering systems design Setup Parts production Select Select Select Select Packaging Select Building occupancy Select 3. Prepare a bill of activities for the activity costs. Product assembly Activity Unit level Parts production Product assembly Packaging Batch level Setup Product level Engineering systems design Facility level Building occupancy Printware Products, Inc. Bill of Activities Hawes Order Activity Cost Rate Cost Driver Level per machine hour per assembly hour per package per setup per engineering hour per machine hour Total activity costs assigned to job Total units of job Activity costs per unit 4. Use ABC to compute the total cost and product unit cost of the Hawes order. Cost summary Direct materials Purchased parts Activity costs Total cost of order machine hours assembly hours packages setups engineering hours machine hours Product unit cost 5. What is the difference between the product unit cost you computed using the traditional approach and the one you computed using ABC? Does the use of ABC guarantee cost reduction for every order? Select Activity Cost