Question

estion 8: Tree Trunks Co. makes two different types of pastries: "Ples" and "Cakes Tree Trunks Co. currently uses ormal costing to find the costs of their pastries. They have been allocating costs based off a plant-wide allocation rate and used direct labor hours as their allocation base. Recently, they have decided to switch to activity based costing. Here is some of the information given regarding the two products and their production: Ples Cakes Direct Materials $960,000 $600,000 Activity Estimated MOH Activity Measure for each Activity Direct Labor $270,000 $120,000 General Factory Direct Labor Hours $ 84,000 Direct Labor Hours 30,000 DLH 12,000 DLH Machine Use Machine Hours $90,000 Machine Hours 200,000 100,000 Machine Set Up Machine Set Ups $ 100,000 Machine Set Ups 100 Set Ups 300 Set Ups Distribution Units Produced $ 104,000 Units Produced 500,000 Pies 300,000 Cakes $ 378,000 Using the given information please: a. Find the cost per unit of Pie using a plant-wide rate: b. Find the cost per unit of Cake using a plant-wide rate: c. Find the cost per unit of Ple using activity based costing: - d. Find the cost per unit of Cake using activity based costing:

Answer 1

Plantwide Rate = Total Overheads/Total Labor hours
=378000/42000 = $9 per hour
Calculation of cost per unit
	Pie	cakes
Direct Material	960,000	600,000
Direct Labor	270,000	120,000
Overheads	270,000	108,000
Total cost	1,500,000	828,000
Number of Units	500,000	300,000
Cost per Unit	3.00	2.76
Activity Rate = Overhead/Total Activity
Activity	Cost	Driver	Rate
General Factory	84,000	42,000	2
Machine Use	90,000	300,000	0.3
Machine Set up	100,000	400	250
Distribution	104,000	800,000	0.13
Calculation of cost per unit
	Pie	cakes
Direct Material	960,000	600,000
Direct Labor	270,000	120,000
Overheads
General Factory	60,000	24,000
Machine Use	60,000	30,000
Machine Set up	25,000	75,000
Distribution	65,000	39,000
Total cost	1,440,000	888,000
Number of Units	500,000	300,000
Cost per Unit	2.88	2.96