Question

Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below:

Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company's two product lines appear below: Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production Deluxe $ 62.00 $ 20.00 0.70 DLHS 10,000 units Standard $ 50.00 $ 16.40 1.40 DLHS 50,000 units The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead Estimated total direct labor-hours $562,000 77,000 DLHS Required: 1. Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system. 2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools: Expected Activity Estimated Overhead Cost $ 385,000 114,000 63,000 $ 562,000 Activity Cost Pools and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Safety testing (tests) Total manufacturing overhead cost Deluxe 7,000 200 Standard 70,000 Total 77,000 300 100 100 30 Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.

Answer 1

Direct Material Direct Labor Dirct Labou hour Per unit Estimated Production Working Notes Delux | 62.00 20.00 0.70 10000 Standard 50.00 16.40 1.40 50000 Estimated MOH Estimated Labor hours Predetermined Overhead Rate 562000 77000 7.30 562000/77000 Delux Standard Total Total Direct Labor Hours =(Units * Direct Labor Hour) 7000 70000 77000 Total Traditional Costing System Delux Direct Material 620000 Direct Labor 200000 Manufacturing Overheads =DLH * Rate 51100 Total Manufacturing Cost 871100 Units Prodcut Cost 87.11 Standard 2500000 820000 511000 3831000 76.62 3120000 1020000 562100 4702100

Determination of Activity Rate Activty Pool Estimated OH Supporing direct Labor 385000 Batch setup 114000 Safetry testing 63000 Base 77000 300 100 Activity Rate 5.00 380.00 630.00 and Total Activity Based Costing System Delux Standard Direct Material 620000 2500000 Direct Labor 200000 820000 Supporing direct Labor= DLH * Activity Da 35000 350000 Batch setup= Base * Activity Rate 76000 38000 Safetry testing = Base * Activity Rate 18900 44100 949900 3752100 Units Prodcut Cost 94.99 75.042 3120000 1020000 385000 114000 63000 Total Cost Standard Answers 1 Units Prodcut cost under Traditional Costing Delux Units Prodcu tcost 87.11 2 Unit Prodcut Cost under Activity Based costing Delux Units Prodcu tcost 94.99 76.62 Standard 75.04