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Problem 4-12 Contrasting ABC and Conventional Product Cost [LO4-2, LO4-3, LO4-4] Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and
Problem 4-12 Contrasting ABC and Conventional Product Cost [LO4-2, LO4-3, LO4-4] Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 61,000 units of EX300 and 12,600 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: Direct materials Direct labor EX300 $367,325 $121,000 TX500 $163,550 $ 43,000 Total $530,875 $164,000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: Activity Activity Cost Pool (and Activity Measure) Manufacturing Overhead EX300 Machining (machine-hours) $207,900 91,000 TX500 63,000 Setups (setup hours) 159,900 Product-level (number of products) General factory (direct labor dollars) 94,680 62,320 80 1 310 1 Total 154,000 390 2 $121,000 $43,000 $164,000 Total manufacturing overhead cost $524,800 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. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Using the plantwide rate, compute the unit product cost for each product. (Round your intermediate calculations and final answers to 2 decimal places.) EX300 TX500 Unit product cost < Req 1A Req 2A >
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