Zhedong Electronics Company in Hangzhou, China, plans to use activity-based costing to determine its product costs. It presently uses a single plantwide factory overhead rate for allocating factory overhead to products, based on direct labor hours. The total factory overhead cost is as follows (currency unit in Chinese RMB, ):

Department Factory Overhead

Production Support 1,225,000 Production (factory overhead only) 175,000 Total cost 1,400,000

The company determined that it performed four major activities in the Production Support Department. The budgeted activity costs are as follows:

Production Support Department Budgeted Activity Cost

Setup 428,750 Production control 245,000 Quality control 183,750 Materials management 367,500 Total 1,225,000

Zhedong estimated the following activity-base usage and units produced for each of its three products:

Products Numbers of Units Direct Labor Hrs. Setups Production Orders Inspections Material Requisitions

LCD TV.......................... 10,000 25,000 80 80 35 120

Tablet............................... 2000 10,000 40 40 40 400

Smartphone ..................... 50,000 140,000 5 5 0 30

Total cost ..................... 62,000 175,000 125 125 75 750

Instructions

1. Determine the factory overhead cost per unit for the LCD TV, tablet, and smartphone under the single plantwide factory overhead rate method. Use direct labor hours as the activity base.

2. Determine the factory overhead cost per unit for the LCD TV, tablet, and smartphone under activity-based costing. Round your answers to two decimal places.

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