Problem 5 14A (Algo) Comparing an ABC system with a traditional costing system LO 5 1, 5 2, 5 3 Stuart Electronics produces video games in three market categories commercial, home, and miniature Stuart has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours The company recently implemented an ABC system when it installed computer controlled assembly stations that rendered the traditional costing system ineffective In implementing the ABC system, the company identified the following activity cost pools and cost drivers Category Total Pooled Cost Types of Costs Cost Driver Unit $ 420,000 Indirect labor wages, supplies, factory utilities, machine maintenance Machine hours Batch 239,400 Materials handling, inventory storage, labor for setups,packaging, labeling and shipping, scheduling Number of production orders Product 120,600 Research and development Time spent by research department Facility 315,000 Rent, general utilities, maintenance, facility depreciation, admin salaries Square footage Additional data for each of the product lines follow Commercial Home Miniature Total Direct materials cost $ 25 15 unit $ 15 15 unit $ 12 15 unit Direct labor cost $ 10 75 hour $ 8 75 hour $ 9 75 hour Number of labor hours 6,000 12,000 2,000 20,000 Number of machine hours 10,000 45,000 25,000 80,000 Number of production orders 200 2,000 800 3,000 Research and development time 10 20 70 100 Number of units 15,000 45,000 14,000 74,000 Square footage 20,000 50,000 30,000 100,000 Required Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base Also determine the combined cost of all three product lines Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs Determine the combined cost of all three product lines

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Problem 5-14A (Algo) Comparing an ABC system with a traditional costing system LO 5-1, 5-2, 5-3 Stuart Electronics produces video games in three market categories:

Problem 5-14A (Algo) Comparing an ABC system with a traditional costing system LO 5-1, 5-2, 5-3

Stuart Electronics produces video games in three market categories: commercial, home, and miniature. Stuart has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers:

Category	Total Pooled Cost		Types of Costs	Cost Driver
Unit	$	420,000	Indirect labor wages, supplies, factory utilities, machine maintenance	Machine hours
Batch		239,400	Materials handling, inventory storage, labor for setups,packaging, labeling and shipping, scheduling	Number of production orders
Product		120,600	Research and development	Time spent by research department
Facility		315,000	Rent, general utilities, maintenance, facility depreciation, admin. salaries	Square footage

Additional data for each of the product lines follow:

	Commercial			Home			Miniature			Total
Direct materials cost	$	25.15	/unit	$	15.15	/unit	$	12.15	/unit
Direct labor cost	$	10.75	/hour	$	8.75	/hour	$	9.75	/hour
Number of labor hours		6,000			12,000			2,000			20,000
Number of machine hours		10,000			45,000			25,000			80,000
Number of production orders		200			2,000			800			3,000
Research and development time		10	%		20	%		70	%		100	%
Number of units		15,000			45,000			14,000			74,000
Square footage		20,000			50,000			30,000			100,000

Required

Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines.
Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.