Question

Activity-Based Costing and Product Cost Distortion Digital Storage Concept Inc. is considering a change to activity-based product costing. The company produce two products, cell phones and tablet PC, in a single production department. The production department estimated to require 4,000 direct labor hours. The total indirect laboris budgeted to be $533,600 Time records from Indirect labor employees revealed that they spent 60% of their time setting up production runs and 60% of their time supporting actual production The following information about cell phones and tablet PCs was determined from the corporate records Number of Setups Direct Labor Hours Units Cell phones 1,600 2,000 92.000 PCs 92,000 Tot 184,000 required, round your awwers to the nearest can factory overhead role system using the director hours as the allocation base .. Determine the indirect labor cost per unit allocated to col phones and tablet PCs under a single plante Cell phones per unit Tablet PCs per un b. Determine the budgeted activity costs and activity for the indirect laborunterativity activito ne for and the other for production support Budgeted Activity Cost Activity Rate Setup per tu Production support per orect labor hour c. Determine the activity cost per un for indirect labor allocated to each product under activity-bas Cellphones

Answer 1

a.Rate per hour = Estimated overheads/Total Hours

= 533,600/4000 = $133.4 per hour

Per unit

Cell phones = 133.4*2000/92,000 = $2.9 per unit

Tablet PC = $2.9 per unit

b.Setup

Budgeted Cost = 533,600*60% = $320,160

Per setup = $320,160/2400 = $133.4

Production Support

Budgeted cost = $213,440

Per hour = $53,36 per hour

c.Cell phones = (133.4*1600+53.36*2000)/92000 = $3.48 per unit

Tablet PC = $2.32 per unit