Reference no: EM132100459

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	$225,500	Number of units
Printing	779,000	Machine hours
Product design	172,200	Change orders
General	594,500	None
Total overhead costs	$1,771,200

Other information is as follows:

	Tablets	Books
Units	62,500	20,000
Direct materials cost per unit	$2.80	$10.00
Direct labor cost per unit	$3.80	$7.80
Direct labor hours	25,000	16,000
Machine hours	125,000	120,000
Change orders	1,200	2,000

Calculate predetermined OH rate.

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

Calculate ABC rates.

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

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.