Question

Sucum Corporation makes ultra light weight backpacking tents. Data concerning the company's two product lines appear below. Direct materiale per unit Delaperunt Director hours per unit tiated at production Deluxe $55.00 $ 13.00 0.70 10,000 units standard 43.00 10.80 1.00 LS 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: tiated total facturing overhead Eatinated total direct labor-houra 5457.000 77.000 DL 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 Eatinated Overhead Cost $ 300.000 93,000 56.000 $ 457.000 Deluxe 7.000 Standard 70.000 100 activity cost tools and activity Measures supporting direct labor direct labor hours) Batch setups (notupa) Safety testing testa) Total manufacturing overhead coat Total 77.000 300 100 200 30 70 Determine the unit product costs of the Deluxe and Standard products under the activity based absorption costing system Complete this question by entering your answers in the tabs below. Required 1 Required 2

Answer 1

Calculations are as follows:-

1). Calculation of traditional cost rate using direct labor hours Total Overhead Direct labor hours $ 4,57,000.00 Total Hours 77,000 $ Rate 5.9351 per labor hour No. of labor hours per unit Overhead rate per hr Overhead cost per unit Deluxe 0.70 5.9351 $ 4.15 $ Standard 1.40 5.9351 8.31 $ $ Calculation of Unit Product Cost Direct materials Direct labor Manufacturing overhead Total unit product cost Deluxe 55.00 $ 13.00 $ 4.15 $ 72.15 $ Standard 43.00 10.80 8.31 62.11

2). Calculation of overhead rates as per activity based costing Estimated Cost Supporting direct labor $ 3,08,000.00 Batch Setups $ 93,000.00 Safety testing $ 56,000.00 Total Activity 77000 $ 300 $ 100 $ Rate 4.00 per labor hour 310.00 per setup 560.00 per testing Calculation of overhead costs Supporting direct labor activity Supporting direct labor rate per hour Overhead cost (A) Deluxe 7000 4.00 28,000.00 Standard 70000 4.00 2,80,000.00 $ $ $ $ 1001 Batch setups Activity Batch setup rate Overhead cost (B) $ $ 2001 310.00 $ 62,000.00 $ 310.00 31,000.00 Safety testing activity Safety testing rate Overhead cost (C) S 5 60.00 $ 16,800.00 $ 560.00 39,200.00 $ $ Total Overhead cost (A + B + C) Estimated annual production (units) Total overhead cost per unit 1,06,800.00 $ 10,000 10.68 $ 3,50,200.00 50,000 7.00 $ Calculation of Unit Product Cost $ $ Direct materials Direct labor Manufacturing overhead Total unit product cost Deluxe 55.00 13.00 10.68 78.68 $ $ $ $ Standard 43.00 10.80 7.00 60.80 $