Reference no: EM132103815

Question -

1. Wild Wild West Co. manufactures two products, Stirrups and Saddles. The company estimated it would incur $160,790 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labour hours. Data concerning the current period's operations appear below:

	Stirrups	Saddles
Estimated volume	3,400 units	4,800 units
Direct labour hours per unit	1.40 hour	1.90 hours
Direct materials cost per unit	$7.40	$12.70
Direct labour cost per unit	$14.00	$19.00

Required: Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year.

2. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labour hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below:

Activity Cost Pool	Estimated Overhead Costs	Expected Activity: Stirrups	Expected Activity: Saddles	Total
Machine setups	$12,190	80	150	230
Purchase orders	79,200	730	920	1,650
General factory	69,400	4,760	9,120	13,880
Total	$160,790

Required - Determine the unit product cost of each product for the current period using the activity-based costing approach.