VideoPlus, Inc. manufactures two types of DVD players, a deluxe model and a standard model. Annual production is 50,000 units for the deluxe and 20,000 units for the standard.

Both require 2 hours of direct labor for completion. Therefore, total annual direct labor

hours are 140,000 [2 hrs. (20,000 + 50,000)].

Expected annual manufacturing overhead is $1,050,000. Thus, the predetermined

overhead rate is $7.50 ($1,050,000 140,000) per direct labor hour.

The direct materials cost per unit is $42 (deluxe) and $11 (standard) model.

The direct labor cost is $18 per unit for both the deluxe and standard models.

The companys managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.

Activity Cost Pool	Cost Driver	Estimated Overhead	Expected Use of Cost Drivers	Expected Use of Drivers by Product
				Standard	Deluxe
Purchasing	Orders	$ 126,000	400	100	300
Receiving	Pounds	30,000	20,000	4,000	16,000
Assembling	Number of parts	444,000	74,000	20,000	54,000
Testing	Number of tests	115,000	23,000	10,000	13,000
Finishing	Units	140,000	70,000	20,000	50,000
Packing and shipping	Pounds	195,000	80,000	18,000	62,000
		$1,050,000

Instructions

(a) Under traditional product costing, compute the total unit cost of both products.

Prepare a comparative schedule of the individual costs by product ( see page 841).

(b) Under ABC, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver).

(a) Computation of unit coststraditional costing.

	Products
Manufacturing Costs	Standard Model	Deluxe Model
Direct Materials
Direct Labor
Overhead
Total Unit Cost

(b) computation of A-B-C overhead rates per cost driver

Activity Cost Pool	Estimated Overhead	Expected Use of Cost Drivers	Activity-Based Overhead Rate
Purchasing		400 orders
Receiving		20,000 pounds
Assembling		74,000 parts
Testing		23,000 tests
Finishing		70,000 units
Packing & Shipping		80,000 pounds