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Walton Electronics produces video games in three market categories: commercial, home, and miniature. Walton has traditionally allocated overhead costs to the three products using the
Walton Electronics produces video games in three market categories: commercial, home, and miniature. Walton has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers: Category Unit Total Pooled Cost $ 661,200 Cost Driver Machine hours Batch 683,300 Types of Costs Indirect labor wages, supplies, factory utilities, machine maintenance Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling Research and development Rent, general utilities, maintenance, facility depreciation, admin. salaries Number of production orders Product Facility 211,200 503,500 Time spent by research department Square footage Additional data for each of the product lines follow: Total Direct materials cost Direct labor cost Number of labor hours Number of machine hours Number of production orders Research and development time Number of units Square footage Commercial $ 37.00/unit $ 13.60/hour 5,100 20,000 240 10% 17,000 22,000 Home $ 23.80/unit $ 13.60/hour 12,900 43,000 1,900 24% 45,000 54,000 Miniature $ 30.80/unit $ 17.70/hour 1,800 13,000 960 66% 16,000 19,000 19,800 76,000 3,100 100% 78,000 95,000 Required a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines. b. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines. Total Cost Cost per Unit a. Type of Product Commercial Home Miniature Combined total Commercial Home Miniature Combined total
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