Racquet Company produced tennis racquets

10,000 units of the Ace and 4,000 of the Sureshot

The Ace sells for $220 each and the Sureshot for $175 each

cost of $20 per unit

Each racquet takes 0.5 direct labour-hours to make. The company pays their employees $10 per hour

Racquet has allocated overhead based on the amount of direct labour dollars

The overhead allocation is $10 overhead for each $1 of direct labour

Activity Generating

Overhead Component Amount the Overhead

Machine amortization 220,000 Machine-hours (MH)

Indirect materials 50,000 Direct material cost (DM)

Indirect labour 80,000 Direct labour-hours (DLH)

Maintenance 150,000 Machine-hours (MH)

Cleaning 100,000 Square footage occupied (Sq.ft)

Factory insurance 25,000 Square footage occupied (Sq.ft)

Heat, light and power 75,000 Machine-hours (MH)

Total monthly overhead $ 700,000

Total Amount Resources Used by Ace Resources Used by Sureshot

Overhead Component

Machine amortization 22,000 MH 2 MH per unit 1/2 MH per unit

Indirect materials $280,000 DM $20 DM per unit $20 DM per unit

Indirect labour 7,000 DLH 1/2 DLH per unit DLH per unit

Maintenance 22,000 MH 2 MH per unit MH per unit

Cleaning 10,000 Sq.ft 7,500 Sq.ft 2,500 Sq.ft.

Factory insurance 10,000 Sq.ft 7,500 Sq.ft 2,500 Sq.ft.

Heat, light, and power 22,000 MH 2 MH per unit MH per unit

Q. How to prepare traditional and activity-based costing system for each racquets?