The Zalucki Company plans to use ABC method to determine its product costs. It presently uses

a single plant wide factory overhead rate for allocating overhead to products, based on direct

labor hours. The total factory overhead cost is as follows:

Department Factory Overhead

Production Support 1,225,000

Production (FOH only) 175,000

Total Cost 1,400,000

The company determined that it performed four major activities in the Production Support

Department. These activities, along with their budgeted costs, are as follows:

Production Support Activities Budgeted Costs

Setup 428,750

Production Control 245,000

Quality Control 183,750

Materials Management 367,500

Total 1,225,000

Zalucki Company estimated the following activity base usage and units produced for each of its

three products:

TV Computer Cellphone Total

Number of Units 10,000 2,000 50,000 62,000

Direct Labor Hours 25,000 10,000 140,000 175,000

Setups 80 40 5 125

Production Orders 80 40 5 125

Inspections 35 40 0 75

Material Requisition 320 400 30 750

REQUIRED:

1. Determine the Factory Overhead for TV, Computer and Cellphone under the single plant wide factory

overhead rate method. Use direct labor hours as the activity base

2. Determine the factory overhead costs for TV, Computer and Cellphone under activity-

based costing

3. Which method provides more accurate product costing? Why?

Super Cool Inc, manufactures cooling units for commercial buildings. The price and