Question

Traditional Product Costing Versus Activity-Based Costing
High Country Outfitters, Inc., makes backpacks for large sporting goods chains that are sold under the customers' store brand names. The accounting department has identified the following overhead costs and cost drivers for next year:

Overhead Item	Expected Costs	Cost Driver	Maximum Quantity
Setup costs	$1,404,000	Number of setups	7,200
Ordering costs	360,000	Number of orders	60,000
Maintenance	1,200,000	Number of machine hours	80,000
Power	120,000	Number of kilowatt hours	600,000

Total predicted direct labor hours for next year is 60,000. The following data are for two recently completed jobs:

	Job 201	Job 202
Cost of direct materials	$18,500	$20,000
Cost of direct labor	$24,125	$76,250
Number of units completed	1,125	915
Number of direct labor hours	270	330
Number of setups	18	22
Number of orders	24	45
Number of machine hours	540	450
Number of kilowatt hours	270	360

a. Determine the unit cost for each job using a traditional company-wide overhead rate based on direct labor hours.
Round rate to two decimal places.
Overhead rate per direct labor hour $Answer

Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.

	Job 201	Job 202
Direct materials	Answer	Answer
Direct labor	Answer	Answer
Overhead	Answer	Answer
Total job cost	Answer	Answer
Units	Answer	Answer
Per unit cost	Answer	Answer

Round answers to two decimal places, if needed.

Setup costs	Answer
Ordering costs	Answer
Maintenance costs	Answer
Power	Answer

NOTE: Round all answers (except cost per unit) to the nearest whole number, when applicable. Round cost per unit answers to two decimal places.  

	Job 201	Job 202
Direct materials	Answer	Answer
Direct labor	Answer	Answer
Overhead
Setup cost	Answer	Answer
Ordering costs	Answer	Answer
Maintenance costs	Answer	Answer
Power	Answer	Answer
Total job costs	Answer	Answer
Units produced	Answer	Answer
Cost per unit	Answer	Answer

Answer 1

Unit cost for each job = (Expected costs/Expected direct labor hours) Unit cost for each job = ((1404000+360000+1200000+120000)/60000) Unit cost for each job = $ 51.40/. Job 202 20,000 76,250 Job cost and per unit cost :- Particulars Cost of direct materials Cost of direct labor Overhead Total Job cost Units Per unit cost Job 201 18,500 24,125 13,878 56,503 1,125 50.22 16,962 1,13,212 915 123.73 Determination of Activity rates :- Activity Activity Rate Setup costs Ordering costs Maintenance Power Expected Costs 14,04,000 3,60,000 12,00,000 1,20,000 Total of cost driver 7,200 60,000 80,000 6,00,000 195.00 6.00 15.00 0.20 Job 201 18,500 24,125 Job 202 20,000 76,250 4,290 Activity based Job cost and unit cost :- Particulars Cost of direct materials Cost of direct labor Overhead :- Setup costs Ordering costs Maintenance Power Total Overhead Total Job cost Units produced Unit cost 3,510 144 8,100 270 54 11,808 6,750 72 11,382 1,07,632 915 117.63 54,433 1,125 48.38