Reference no: EM132562139

Better wear for woman manufactures two types of suits-Hand made and Machine made-and applies manufacturing overhead to all units using direct labor hours. Production information follows. Hand Made Machine Made Anticipated volume (units) 31,000 58,000 Direct-material cost per unit $ 75 $ 45 Direct-labor cost per unit $15 per hour Hand made = 4 hours per suit Machine made = 2 hours per suit The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities' three respective cost drivers, follow.

                         Hand Made                   Machine                  Made total 

Setups                     176                           136                      312

Machine hours              62,400                     87,750                 150,150

Outgoing shipments            150                        200                    350

The firm's total overhead of $23,423,400 is subdivided as follows: manufacturing setups, 22%; machine processing, 60%; and product shipping, 18%.

Current sales price is the following based on using DL hours for MOH. $ 650.00 $290.00

Required:

Question 1. Compute the per unit manufacturing cost of Hand Made and Machine Made by using the company's current overhead costing procedures using Direct labor hours for applied MOH

Question 2. Compute the per unit manufacturing cost of Hand Made and Machine Made by using activity-based costing.

Question 3. Which method should the company use and why? List at least 3 reasons why.

Question 4. If the company decides to use ABC, should the company change the sales price for each suit? What should it be based on?