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Question Question 1. Black Company manufactures two types of products: Premium and Classic. For the current year, data for the two products are as follows:
Question Question 1. Black Company manufactures two types of products: Premium and Classic. For the current year, data for the two products are as follows: Premium Classic Production in units 5,000 units 10,000 units Direct material cost per unit $ 13 $ 30 Direct labor cost per hour $ 20 $ 15 There are three indirect cost categories and the company obtained the following activity-based costing information: Activity Indirect Costs Allocation base Premium Classic Setups $ 50,000 Number of setups 60 setups 40 setups Assembly $ 350,000 Direct labor hours 1,000 hours 4,000 hours Packing $ 120,000 Number of shipments 100 shipments 200 shipments Total $ 520,000 Required 1. Using an activity-based costing approach, based on the given data above, determine the unit cost of each product. (50 points) 2. Assume that the administration currently using traditional costing approach and accumulates all indirect costs in one single cost pool and uses 'number of units produced" as one cost driver. Determine the unit cost of each product. (20 points) 3. Compare the unit cost differences in each department among activity based costing and traditional costing. Are the differences significant? (10 points) 4. What are the benefits, if any, do you see to Black Company if either activity-based costing is used instead of traditional costing? Consider this question from the standpoint of a) product pricing, b) cost control, c) departmental performance. (20 points)
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