Q$7-$

Atlas Company produces two products $-$ the Ab Bench and the Ab Coaster abdominal trainers.

The Ab Bench is a high$-$volume item totaling

$25,000$

The Ab Coaster is a low$-$volume item totaling only

$5,000$ units per year.

The direct materials cost per unit is

$40$

for the Ab Coaster.

for the Ab Bench and $,30$

The direct labor cost is

$12$

one hour of direct labor for completion.

$\backslash$table$[[$Therefore$,$ total annual direct labor hours are,$30,000,$Expected annual$],[$manufacturing overhead costs are,$900,000,$Thus, the predetermined overhead rate$]]$

under traditional costing, using direct labor hours, is $30$ per direct labor hour. Since

both products require one direct labor hour per unit, both products are allocated overhead costs of $30$ per unit under traditional costing.

Other relevant information related to cost are as follows:

$\backslash$table$[[\backslash$table$[[$Activity Cost Pools$],[$Setting up Machines$]],\backslash$table$[[$Activity Estimated$],[$Overhead$],[355,000]],\{$

$\backslash$table$[[$Activity Estimated$],[$Overhead$]]\},\backslash$table$[[$Expected Use of Cost Drivers per$],[$Product$]]],[$Ab Bench,Ab Coaster$],[$Manhinina$,1,550,$Setups,$500,1,550],[$Macnining$,555,000,50,550,$Mach. Hrs$,30,550,20,550],[$Inspecting$,105,500,2,550,$Inspection,$500,1,500],[$Total$,1,015,500,,,,]]$

Instructions:

Unit Costs under:

i$-$ Activity Based Costing

ii$-$ Traditional Costing

Answer$-$

ACCT$212-$Mod$02-$Ch$02,3$ & $4$ Classwork $02-$ Page $45$ of $60$