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Spencer's Sports manufactures outdoor equipment at three regional plants. The Freeway Plant produces two models of fishing reels, the Stream and the Surf. The
Spencer's Sports manufactures outdoor equipment at three regional plants. The Freeway Plant produces two models of fishing reels, the Stream and the Surf. The Surf model is heavier and more durable. Overhead costs are currently allocated using direct labor cost. The plant manager has just returned from a week-long executive course where the instructor discussed product costing and, specifically, activity-based costing (ABC). The plant manager has asked the plant controller about implementing ABC at the plant. The controller has collected the following information on plant overhead for the most recent period: Activity Setting up Inspecting Packing and shipping Total overhead Cost Driver Number of setups Number of inspections: Number of packages shipped Cost Cost Driver Volume Stream Surf $ 190,080 142,560 89,760 15 135 36 45 50 200 $ 422,400 The controller also collected the following information on production volume and direct costs for each product: Units produced Streami 18,000 $450,000 219,000 Surf 4,500 $337,500 309,000 Direct materials cost Direct labor cost Total direct cost 5 669,000 $ 646,500 Required: Total 22,500 $ 787,500 528,000 $ 1,315,500 a. Compute the unit cost of each model under the current system. b. Compute the unit cost of each model under the ABC system suggested by the controller's classification of overhead costs. Complete this question by entering your answers in the tabs below. Required A Required B Compute the unit cost of each model under the current system. Note: Round your answers to 2 decimal places.
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