Question

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 $ 65.00 $23.00 0.70 DLHS 10.000 units Standard $ 53.00 $ 18.80 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 $651,000 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 $ 462,000 123, 66,000 $651,000 Deluxe 7.00 Standard 70.000 Activity Cost Pools and Activity Measures Supporting direct labor (direct labor. hours) Batch setups (setups ) Safety testing (tests) Total manufacturing overhead cost Total 77. 100 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.

Answer 1

1) Calculate unit product cost

Overhead rate = 651000/77000 = 8.45 per DLH

	Deluxe	standard
Direct material	65	53
Direct labor	23	18.80
Overhead	8.45*.70 = 5.92	8.45*1.4 = 11.83
Unit product cost	93.92	83.63

2) Unit product cost under activity based costing

	Deluxe	Standard
Supporting direct labor	42000	420000
Batch setup	82000	41000
Safety testing	19800	46200
Total overhead	143800	507200
Unit	10000	50000
Overhead cost per unit	14.38	10.14
Direct material	65	53
Direct labor	23	18.80
Unit product cost	102.38	81.94