The following data are for the two products produced by Tadros Company. Direct materials Direct labor hours Machine hours Batches Volume Engineering modifications Number of customers Market price Product A $14 per unit 0.5 DLH per unit 0.4 MH per unit 100 batches 10,000 units 11 modifications 500 customers $35 per unit Product B $27 per unit 1.4 DLH per unit 1.0 MH per unit 200 batches 2,000 units 55 modifications 400 customers $95 per unit per unit The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows. Indirect manufacturing Engineering support Electricity Setup costs Nonmanufacturing Customer service Costs Driver $24,500 'Engineering modifications 24,000 Machine hours 40,000 Batches 71,000 Number of customers 1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. $ 88,500 $ 11.35 per direct labor hour 7,800 Overhead costs Direct labor hours Overhead Assigned Product A Product B Activity Plantwide OH rate Total Overhead Cost Driver 5,000 $ 11.35 $ 56,750 2,800 $ 11.35 $ 31,780 OH Cost per Units Produced unit 10,000 $ 5.67 2,000 Total manufacturing cost per unit: Product A Product B 5.67 Total manufacturing cost 1.2 What is the gross profit per unit? Product A Product B Market price Gross profit per unit 2.1 How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate? Product B Product A Gross profit per unit Units purchased per customer Gross profit per customer 2.2 What is the cost of providing customer service to each customer? 0 Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate? Product A Product B Gross profit per customer Customer service cost per customer Profit (loss) per customer Is the profit adequate? 3.1 Determine the manufacturing cost per unit of each product line using ABC. Engineering Support 0 Electricity 0 Setup 0 + Overhead Assigned Activity Driver Activity rate Total Overhead Cost Product A Engineering support Electricity Setup $ 0 Product B Engineering support Electricity Setup $ 0 Product A Product B Total manufacturing costs Direct Materials per unit Direct Labor per unit Overhead per unit Total manufacturing cost per unit 5 Book 3.2 What is the gross profit per unit? Product A Product B Market price rences (2734) (82 54) 4.1 How much gross profit is generated by each customer of Product A and Product B using ABC? Product A Product B 0 Units purchased per customer Gross profit oss) per customer 4.2 Is the gross profit adequate for each customer of Product A and B using ABC? Product A Product B Gross profit (loss) per customer Customer service cost per customer Profit (loss) per customer Is the profit adequate using ABC? 5. Which method of product costing gives better information to managers of this company? Activity-based costing method Departmental overhead rate method Plantwide overhead rate method
