Compute the unit product costs for the two products

Reference no: EM132725255

Problem - Harrison Company makes two products and uses a conventional costing system in which a single plant wide, predetermined overhead rate is computed based on direct labour-hours. These products are customized to some degree for specific customers. Data for the two products for the upcoming year follow:

	Rascon	Parcel
Direct materials cost per unit	$29.50	$23.50
Direct labour cost per unit	$27.00	$4.50
Direct labour-hours per unit	0.90	0.40
Number of units produced	31,000	120,000

Required -

1. The company's manufacturing overhead costs for the year are expected to be $868,000. Using the company's traditional costing system, compute the unit product costs for the two products.

2. Management is considering an ABC system in which half of the overhead would continue to be allocated on the basis of direct labour-hours and half would be allocated on the basis of engineering design time. This time is expected to be distributed as follows during the upcoming year:

	Rascon	Parcel	Total
Engineering design time (in hours)	6,000	3,000	9,000

Compute the unit product costs for the two products using the proposed ABC system.

Reference no: EM132725255

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