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Determine the indirect labor cost per unit

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Reference no: EM131788615

Problem - Memory Media Inc. is considering a change to activity-based product costing. The company produces two products, CDs and DVDs, in a single production department. The production department is estimated to require 4,000 direct labor hours. The total indirect labor is budgeted to be $420,000.

Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time supporting actual production.

The following information about CDs and DVDs was determined from the corporate records:

 

Number of Setups

Direct Labor Hours

Units

CDs

500

2,000

75,000

DVDs

1,100

2,000

75,000

Total

1,600

4,000

150,000

If required, round all per unit answers to nearest whole cent.

a. Determine the indirect labor cost per unit allocated to CDs and DVDs under a single plant wide factory overhead rate system using the direct labor hours as the allocation base.

b. Determine the activity pools and activity rates for the indirect labor under activity-based costing. Assume two activity pools-one for setup and the other for production support.

c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.

Reference no: EM131788615

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