Question

Please show work. Thanks

Group Problem 2 SU Company makes two products: Standard and Unique. The Standard product line is a high volume line and the Unique line is a low volume, specialized product. Assume the overhead costs from service departments have gone through a stage 1 allocation. SU currently uses a machine hour basis to allocate indirect manufacturing costs to its product line, but is curious about Activity Based Costing. There current cost management system already provides the following data: Estimated Cost Cost Driver Used to Estimated Overhead Allocate Overhead Cost for the Activity # of pounds/Unit Number of machine Driver Volume for Year 2 100,000 lbs Activity 1. Purchasing materials $200,000 2. Machine setups 400 setups s800,000 setups Hours of Inspection Machine hours 3. Inspections 4. Running machines Total estimated overhead $400,000 $600,000 $2,000,000 4000 hours 20,000 hours Data for January, Year 2 Direct labor Hours 2 hours/units Units 1,300 units Standard products. Unique products 2.5 hours/unit 400 units Unique Products 8,000 pounds 50 setups Standard Activities Products 8,000 pounds 15 setups 220 hours 1. Purchasing materials 2. Machine setups 3. Inspections 4. Running machines 400 hours 1,000 hours 2,000 hours Compute the costs per unit for both the Standard product and the Unique product using both the department overhead rate and the activity-based costing rates for January. Assume the direct materials cost are $100 and $200 per unit for Standard and Unique, respectively; and direct labor costs are $10 and $12 per hour, respectively. Round unit costs to the nearest dollar. Stanuaiu

Answer 1

Answer

	Standard	Unique
Traditional Per Unit Costs	$ 273.85	$ 480.00
ABC Per Unit Costs	$ 218.46	$ 695.00

Calculations:

Traditional Per Unit Costs

	Standard	Unique
Overheads (2,000,000/20,000* machine hours)	$ 200,000	$ 100,000
Direct material	$ 130,000	$     80,000
Direct Labor	$     26,000	$     12,000
Total costs	$ 356,000	$ 192,000
Units	1,300	400
Per Unit Costs	$    273.85	$    480.00

ABC Per Unit Costs

	Costs	Total activity	Activity Rate	Actual Usage - Standard	Actual Usage - Unique	Overheads - Standard	Overheads - Unique
Purchasing Material	$      200,000.00	100,000	$            2.00	8,000	8,000	$                    16,000.00	$                16,000.00
Machine setup	$      800,000.00	400	$    2,000.00	15	50	$                    30,000.00	$             100,000.00
Inspection	$      400,000.00	4,000	$        100.00	220	400	$                    22,000.00	$                40,000.00
Running machines	$      600,000.00	20,000	$          30.00	2,000	1,000	$                    60,000.00	$                30,000.00
Total	$   2,000,000.00					$                 128,000.00	$             186,000.00

	Standard	Unique
Overheads	$ 128,000	$ 186,000
Direct material	$ 130,000	$     80,000
Direct Labor	$     26,000	$     12,000
Total costs	$ 284,000	$ 278,000
Units	1,300	400
Per Unit Costs	$    218.46	$    695.00

​​​​​​​In case of any doubt, please comment.