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Problem 4-12 Contrasting ABC and Conventional Product Cost (LO4-2, L04-3, L04-4) Precision Manufacturing Inc. (PMI) makes two types of industrial component parts--the EX300 and the
Problem 4-12 Contrasting ABC and Conventional Product Cost (LO4-2, L04-3, L04-4) Precision Manufacturing Inc. (PMI) makes two types of industrial component parts--the EX300 and the TX500 any produces 68,000 units of EX300 and 13,300 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below. EX300 X500 TO Direct material 3374,325 $170,550 $544,075 Direct labor $120,000 $ 46,500 5174,500 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to fout activities as shown below: Activity 2X500 66,500 Activity Cost Pool Cand Activity Measure) Machining machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) Total manufacturing overhead cost Manufacturing Overhead $189,175 237,600 176,760 82,015 $680,550 EX300 98,000 115 1 $128.000 Total 164.500 495 2 $174,500 1 546.500 Required: 1-a. Compute the plantwide overhead rate that would be used in the company's conventional cost system 1-b. Using the plantwide rate, compute the unit product cost for each product 2-a. Compute the activity rate for each activity cost pool. 2-b. Using the activity rates, compute the unit product cost for each product
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