The following data are for the two products produced by Shakti Company. The companys direct labor rate

The following data are for the two products produced by Shakti Company.

The company’s direct labor rate is $ 20 per direct labor hour (DLH). Additional information follows.

Required
1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. What is the gross profit per unit?
2. How much gross profit is generated by each customer of Product A using the plantwide overhead rate? How much gross profit is generated by each customer of Product B using the plantwide over-head rate? What is the cost of providing customer service to each customer? What information is provided by this comparison?
3. Determine the manufacturing cost per unit of each product line using ABC. What is the gross profit per unit?
4. How much gross profit is generated by each customer of Product A using ABC? How much gross profit is generated by each customer of Product B using ABC? Is the gross profit per customer adequate?
5. Which method of product costing gives better information to managers of this company? Explainwhy.

Transcribed Image Text:

Product A Product B $24 per unit Direct materials . ...$15 per unit Direct labor hours..... . .. . . 0.3 DLH per unit 6 DLH per unit Machine hours0. MH per unit 12 MH per unit Batches 225 batches 2,000 units 58 modifications 400 customers $120 per unit 125 batches Engineering modifications Number of cu Market price. 12 modifications 500 customs $30 per unit Costs Driver Indirect manufacturing Engineering support ..24,500 Engineering modifications Electricity4000 Machine hours Setup costs 52,500 Batches Nonmanufacturing Customer service ..........81,000 Number of customers