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Prosciutto Inc., makes two products and is currently using a predetermined overhead rate based on direct labour hours to apply overhead. Data for these
Prosciutto Inc., makes two products and is currently using a predetermined overhead rate based on direct labour hours to apply overhead. Data for these products for the upcoming year is shown below: Product A Product B Direct Materials cost per unit $ 19.50 $ 33.00 Direct Labour cost per unit $ 9.00 $ 4.50 Direct Labour hours per unit 0.60 0.30 Number of Units produced 30,000 120,000 These products do have some level of customization for each specific customer. Management is now considering the implementation of an activity-based-costing system where 50% of the overhead would continue to be allocated on the basis of direct labour hours and the remainder allocated on the basis of engineering design time. Estimated overhead cost is $864,000. The time is expected to be distributed as follows for the upcoming year: Engineering Design time (in hours) Product A 4,500 Product B Total 4,500 9,000 Required: Calculate the unit product cost for the two products using the proposed activity-based- costing system.
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To calculate the unit product cost for the two products using the proposed activitybasedcosting system we will allocate overhead costs based on both d...Get Instant Access to Expert-Tailored Solutions
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