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Question: DWD Manufacturing manufactures two products, A and B. Data relating to the two products follow: Product A Product B Direct Material $82.00 $60.00 Direct

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Question: DWD Manufacturing manufactures two products, A and B. Data relating to the two products follow: Product A Product B Direct Material $82.00 $60.00 Direct Labour 2.0 hours @ $20/hour $40.00 1.0 hours @ $20/hour $20.00 Normal Capacity Production: Product A 5,000 units @ 2.0 DLH per unit = 10,000 DLH Product B 30,000 units @ 1.0 DLH per unit = 30,000 DLH Total DLH @ Normal Capacity 40,000 DLH The company has always used direct labour hours as the base for applying factory overhead costs to products. Expected factory overhead at normal capacity is $2,000,000 per year. Product A is more complex to manufacture than product B and it requires special computer controlled processing machinery for its manufacture. Because of this special processing, the company is considering adopting activity-based costing to achieve more accurate product costing. + The company has identified 4 separate activities as follows: Expected Number of Events or Transactions Activity Centre & (Cost Driver) Traccable Total Product A Product B Costs 1. Machine Setups (Number of $390,000 300 100 200 setups) 2. Purchasing Costs (Purchase 150,000 1.000 400 600 Orders) 3. Computer Processing (CPU 360,000 24,000 24,000 Minutes) 1,100,000 40,000 10,000 30,000 4. General Factory (Labour 2,000,000 Hours Required: Complete the following using Excel Spreadsheets. (a) If the company continues to use Direct Labour Hours as the base for applying overhead to products, calculate: i . The pre-determined overhead rate per direct labour hour. The cost to produce one unit of each product. b) Assume the company decides to adopt activity-based costing to apply overhead cost to products, calculate: 1 The overhead rate per unit of cost driver for each activity centre. i. The amount of overhead cost to be applied to each product. ii. The cost to produce one unit of each product. iv. Recommend if adopting Activity based Costing would be feasible for DWD Manufacturing

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