Reference no: EM132011427

Question - Altima Company uses an overhead costing system based on direct labor hours for its two products X and Y. The company is considering adopting an activity-based costing system, and collects the following information for the month of October:

Product X Product Y

Production units 20,000 2,000

Direct materials cost per unit $50 $40

Direct labor cost per hour $10 $10

Direct labor hours 34,000 6,000

Overhead Total Activity Consumption

Overhead Cost Pool Cost Activity Product X Product Y

Machine setup 60,000 1,000 setups 300 700

Engineering change order 40,000 100 orders 20 80

Facility rent 90,000 1,000 sq. ft. 300 700

REQUIRED -

1. Compute the unit manufacturing cost of each product under a volume-based costing system based on direct labor hours.

2. Compute the unit manufacturing cost of each product under the activity-based costing system.