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Wyoming Manufacturing Limited has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct

Wyoming Manufacturing Limited has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs). The company has two products, Widgets and Trinkets, about which it has provided the following data:

Widgets

Trinkets

Direct Materials per unit

$11.10

$62.50

Direct Labour per unit

$2.00

$11.00

Direct labour hours per unit

0.20

1.10

Annual production

45,000

10,000

The firms estimated total manufacturing overhead for the year is $1,521,960 and the firm's estimated total direct labour-hours for the year is 20,000.

The company is considering using activity-based costing to determine its unit product costs. Data for this proposed activity-based costing system appear below:

Activities

Widgets

Trinkets

Total

Supporting direct labour

9,000

11,000

20,000

Setting up machines

814

374

1,188

Parts administration

924

1,012

1,936

Activities & Drivers

Estimated MOH cost

Supporting direct labour (DLH)

$352,000

Setting up machines (setups)

$201,960

Parts Administration (part types)

$968,000

Total

$1,521,960

Required:

  1. Determine the unit product cost of each of the company's two products under the traditional costing system.

  1. Determine the unit product cost of each of the company's two products under activity-based costing system.

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