Question

Traditional Product Costing Versus Activity-Based Costing
Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $192,000, consisting of the following activity cost pools for the current month:

Activity Centers	Activity Costs	Cost Drivers	Activity Level
Assembly setups	$39,000	Setup hours	1,500
Materials handling	9,000	Number of moves	300
Assembly	120,000	Assembly hours	12,000
Maintenance	24,000	Maintenance hours	1,200
Total	$192,000

Total direct labor hours used during the month were 8,000. Panasonic produces many different electronic products, including the following two products produced during the current month:

	Model X301	Model Z205
Units produced	1,000	1,000
Direct materials costs	$9,000	$9,000
Direct labor costs	$6,500	$6,500
Direct labor hours	500	500
Setup hours	50	100
Materials moves	25	50
Assembly hours	800	800
Maintenance hours	10	40

a. Calculate the total per-unit cost of each model using direct labor hours to assign manufacturing overhead to products.
Round rate to two decimal places.
Overhead rate per direct labor hour $Answer

Mark 0.00 out of 1.00

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.

	X301	Z205
Direct materials	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Direct labor	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Overhead cost	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Total cost	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Units	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Per unit cost	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00

b. Calculate the total per-unit cost of each model using activity-based costing to assign manufacturing overhead to products.

Assembly setups	Answer Mark 0.00 out of 1.00 per setup hour
Materials handling	Answer Mark 0.00 out of 1.00 per move
Assembly	Answer Mark 0.00 out of 1.00 per assembly hour
Maintenance	Answer Mark 0.00 out of 1.00 per maintenance hour

Round cost per unit to two decimal places, if needed.

	X301	Z205
Direct materials cost	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Direct labor cost	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Manufacturing overhead costs:
Assembly setup	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Materials handling	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Assembly	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Maintenance	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Total cost	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Units	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00
Per unit cost	Answer Mark 0.00 out of 1.00	Answer Mark 0.00 out of 1.00

Answer 1

traditional costing system uses single cost driver(direct labor hour In this case) to allocate the cost to products.

Calculate the total per-unit cost of each model using direct labor hours to assign manufacturing overhead to products.
Round rate to two decimal places.

rate per hour = total cost/ total direct labor hour

=$192,000/8000

=$24 per direct labor hour

	X301	Z205
Direct materials	$9,000	$9,000
Direct labor	$6,500	$6,500
Overhead cost	$12,000[24*500hours]	$12,000[$24*500hours]
Total cost	$27,500	$27,500
Units	1000	1000
Per unit cost	$27.5[27500/1000]	$27.5

b. ABC costing system is activity based costing in which each cost is allocated using different cost driver as suitable to the activity.

assembly setups	$26 per setups[$39,000/1500]
Materials handling	$30 per move[$9,000/300]
Assembly	$10 per assembly hour [$120,000/12000]
Maintenance	$20 per maintenance hour[$24,000/1200]

cost allocation

	X301	Z205
Direct materials cost	$9,000	$9,000
irect labor cost	$6,500	$6,500
Manufacturing overhead costs:
Assembly setup	$1300[$26*50]	$2600[$26*100]
Materials handling	$750[$30*25]	$1500[$30*50]
Assembly	$8000[$10*800]	$8000[$10*800]
Maintenance	$200[$20*10]	$800[$20*40]
Total cost	$10,250	$12,900
Units	1000	1000
Per unit cost	$10.25[10250/1000]	$12.9 [12900/1000]