Simplifying the ABC System: DBC

Electan Company produces two types of printers. The company uses ABC, and all activity drivers are duration drivers. Electan Company is considering using DBC and has gathered the following data to help with its decision.

A. Activities with duration drivers:

	Activities
Products	Changeover	Assembly	Testing	Rework	Total Hours
Printer A	1,000	12,000	8,000	8,000	25,000
Printer B	4,000	8,000	12,000	12,000	25,000
Total hours	5,000	20,000	20,000	20,000	50,000

B. Activities with consumption ratios and costs:

	Activities
Products	Changeover	Assembly	Testing	Rework	Cost Assignment
Printer A	0.20	0.60	0.40	0.80	$155,000
Printer B	0.80	0.40	0.60	0.20	$155,000
Activity costs	$75,000	$120,000	$60,000	$55,000	$310,000

C. Products with cycle time and practical capacity:

Products	Cycle Time	Practical Capacity
Printer A	2.5 hours	10,000 units
Printer B	1.25 hours	20,000 units

Required:

1. Calculate the total time for all primary activities. hours

2. Calculate the overhead rate that DBC uses to assign costs.

$ per labor hour

3. Use the overhead rate calculated in Requirement 2 to calculate the overhead cost per unit for each product.

Printer A	$
Printer B	$

Calculate the total overhead assigned to each product.

Printer A	$
Printer B	$

4. What if the units actually produced were 10,000 for Printer A and 18,000 for Printer B. Using DBC, calculate the cost of unused capacity.

$