Question

Exercise 2A-3 Activity-Based Absorption Costing as an Alternative to Traditional Product Costing [LO2-5] Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company's two product lines appear below: 10 points Deluxe Standard unit Dieet maeerials per s 26.00 Direct labor-hours per unit Estimated annual production 0.70 DLHS 1.40 DLHS 10,000 units units 50,000 eBook 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: Print Estimated total manufacturing overhead Estimated total direct labor-hours $586,000 77,000 DLHS References Required: 1. Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system. 2. The company have the following three activity cost pools: considering replacing its traditional costing system with an activity-based absorption costing system that would Expected Activity Estimated Overhead Activity Cost Pools and Activity Measures Supporting direct labor (direct labor-hours ) Batch setups (setups) Safety testing (tests) Deluxe Standard Total Cost $ 385,000 132,000 69,000 70,000 100 7,000 200 77,000 300 30 70 100 586,000 Total manufacturing overhead cost Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.

Answer 1

Z AB U V W X Y AA AC 1. Traditional Costing Deluxe $68.00 56.00 $26.00 21.20 Manufacturing OH $ 5.33 $ 10.65 Unit Product Cost $99.33 $ 87.85 2. ABC 1 Particulars Standard Particulars Deluxe Standard 2 680,000.00 $2,800,000.00 $ 260,000.00 $1,060,000.00 35,000.00 $ Direct Materials Direct Materials 3 Direct labor Direct labor 4 Supporting DL Batch Setups Safety Testing Total Costs Units Produced Unit Product Cos $ 350,000.00 44,000.00 88,000.00 $ 20,700.00 $ 6 48,300.00 7 $1,083,700.00 $4,302,300.00 8 10,000.00 50,000.00 9 86.05 108.37 $ 10 11

AR V X Y AA 1. Traditional Costing Deluxe 68 2. ABC Standard 56 21.2 Particulars Particulars Deluxe Standard =10000 68 = 10000 26 # 385000*700o/77000 132000 0.666666666666667 69000 0.3 SUM(AA3: AA7) 10000 56-50000 21.2 50000 # 385000*70000/77000 132000 100/300 69000 70/100 SUM (AB3:AB7) 50000 EAB8/AB9 Direct Materials Direct labor Supporting DL Batch Setups Safety Testing Total Costs Units Produced Unit Product CostAA8/AA9 Direct Materials 26 Direct labor Manufacturing OH0.7 586000/770001.4'586000/77000 Unit Product Cost SUM(W3:W5) 5 =SUM (X3: X5) 6 7 8 10 11