Compute the unit manufacturing costs

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Reference no: EM13783854

ABC Company uses an overhead costing system based on direct labor hours for it 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 $50.00 $40.00 Direct Labor cost per unit $10.00 $10.00 Direct Labor hours 34,000 6,000 Over Head Over Head Total Activity Consumption Activity Consumption Cost Pool Cost Activity Product X Product Y Machine Shop $60,000 1,000 setups 300 700 Engineering Change Order 80,000 100 orders 20 80 Facility Rent 80,000 1,000 sq ft 300 700 1. Compute the unit manufacturing costs of each product under a traditional (i.e. volume based) costing system using "direct labor cost" as the allocation basis. 2. Compute the unit manufacturing cost of each product under the activity-based costing system. Use the over head cost pools and the corresponding activity for each pool that have been provided to you for allocating over head costs. 3. Which product appears "more expensive" to manufacture under a traditional costing system compared to ABC costs? Why?

Reference no: EM13783854

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