Question
Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the companys two product lines appear below: Deluxe Standard Direct materials per unit $ 56.00 $
Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the companys two product lines appear below:
Deluxe | Standard | |||
---|---|---|---|---|
Direct materials per unit | $ 56.00 | $ 44.00 | ||
Direct labor per unit | $ 14.00 | $ 11.60 | ||
Direct labor-hours per unit | 0.70 | DLHs | 1.40 | DLHs |
Estimated annual production | 10,000 | units | 50,000 | units |
The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:
Estimated total manufacturing overhead | $ 538,000 | |
---|---|---|
Estimated total direct labor-hours | 77,000 | DLHs |
Required:
1. Determine the unit product costs of the Deluxe and Standard products under the companys traditional costing system.
2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools:
Activity Cost Pools (and Activity Measures) | Estimated Overhead Cost | Expected Activity | ||
---|---|---|---|---|
Deluxe | Standard | Total | ||
Supporting direct labor (direct labor-hours) | $ 385,000 | 7,000 | 70,000 | 77,000 |
Batch setups (setups) | 96,000 | 200 | 100 | 300 |
Safety testing (tests) | 57,000 | 30 | 70 | 100 |
Total manufacturing overhead cost | $ 538,000 |
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