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The following data are for the two products produced by Tadros Company. The following data are for the two products produced by Tadros Company. The

The following data are for the two products produced by Tadros Company. The following data are for the two products produced by Tadros Company.
The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.
Required:Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours.
2.1 How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate? Gross profit per customer
2.2 What is the cost of providing customer service to each customer?
Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate?
3.1 Determine the manufacturing cost per unit of each product line using ABC. 3.2 What is the gross profit per unit?
4.1 How much gross profit is generated by each customer of Product A and Product B using ABC ?
4.2 Is the gross profit adequate for each customer of Product A and B using ABC ?
Which method of product costing gives better information to managers of this company?
Method of product costing for better information
Product A Product B
Direct materials $ 15 per unit $ 25 per unit
Direct labor hours 0.5 DLH per unit 1.5 DLH per unit
Machine hours 0.4 MH per unit 1.2 MH per unit
Batches 200 batches 360 batches
Volume 16,000 units 3,600 units
Engineering modifications 12 modifications 88 modifications
Number of customers 800 customers 720 customers
Market price $ 55 per unit $ 220 per unit
The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.
Costs Driver
Indirect manufacturing
Engineering support $ 53,600 Engineering modifications
Electricity 53,600 Machine hours
Setup costs 160,800 Batches
Nonmanufacturing
Customer service 129,200 Number of customers
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