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