Reference no: EM131194621

Question:

Claire Company produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis of direct labor hours. After implementing activity-based costing, managers determined the following cost pools and cost drivers. They also decided that general costs should no longer be allocated to products.

Activity Pool		Department Costs				Cost Driver
Binding			$231,296			Number of units
Printing			812,864			Machine hours
Product design			199,680			Change orders
General			644,384			None
Total overhead costs			$1,888,224

Other information is as follows:

		Tablets		Books
Units		62,700		20,400
Direct materials cost per unit		$3.02		$10.31
Direct labor cost per unit		$4.17		$7.97
Direct labor hours		25,100		16,500
Machine hours		126,000		122,000
Change orders		1,200		3,000

1. Calculate predetermined OH rate.

2. Determine the unit product cost for Tablets and Books using the traditional costing system.

3. Calculate ABC rates.

4. Determine the unit product cost for Tablets and Books using the activity-based costing system.

5. Show that General cost is the difference between the total overhead costs allocated to products under the traditional system and the total cost allocated to products under the activity-based costing system.