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 $ 67.00 $ 25.00 0.70 DLHS 10,000 units Standard $ 55.00 $ 20.40 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 $505,000 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 Activity Cost Pools (and Activity Measures) Supporting direct labor (direct labor-hours) Batch setups (setups) Safety testing (tests) Total manufacturing overhead cost Estimated Overhead Cost $308,000 129,000 68,000 $505,000 Deluxe 7,000 200 30 Standard 70,000 100 70 Total 77,000 300 100 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. Required 1 Required 2 Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Deluxe Standard Unit product cost < Required 1 Required 2 >

Answer 1

Requirement 1

	Deluxe	standard
Unit product cost	$                  96.59	$                     84.58

.

Requirement 2

	Deluxe	standard
Total Cost per unit	$               105.44	$                     82.81

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Support direct labor	Number of Direct labor hour	$ 308,000	77000	$               4.00	Per Direct labor hour
Batch setup	Number of setup	$ 129,000	300	$          430.00	Per setup
Safety testing	Number of test	$ 68,000	100	$          680.00	Per test

.

Cost assigned to Deluxe
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Support direct labor	$             4.00	7,000.00	$ 28,000.00
Batch setup	$        430.00	200.00	$ 86,000.00
Safety testing	$        680.00	30.00	$ 20,400.00
Total Overheads assigned	$ 134400.00
Production	10,000.00
Overhead cost per unit	$ 13.44

.

Cost assigned to standard
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Support direct labor	$             4.00	70000	$ 280,000
Batch setup	$        430.00	100	$ 43,000
Safety testing	$        680.00	70	$ 47,600
Total Overheads assigned	$           370,600.00
Production	50,000.00
Overhead cost per unit	$                 7.41

.

ABC Costing
	Deluxe	standard
Direct material	$                  67.00	$                     55.00
Direct labor	$                  25.00	$                     20.40
Overheads	$                  13.44	$                        7.41
Total Cost per unit	$               105.44	$                     82.81

.

Traditional costing

Plantwide overhead rate (505000/77000)	$                 6.56
Overhead allocated to Deluxe (5700 x 276.82)	$             45,909
Overhead allocated to standard (1500 x 276.82)	$          459,091
Overhead allocated to Deluxe per unit (overhead allocated / units)	$                 4.59
Overhead allocated to standard per unit (overhead allocated / units)	$                 9.18

.

Traditional costing
	Deluxe	standard
Direct material	$                  67.00	$                     55.00
Direct labor	$                  25.00	$                     20.40
Overheads	$                    4.59	$                        9.18
Total Cost per unit	$                  96.59	$                     84.58