Determine the unit product costs of the Deluxe

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Question - Stillicum Corporation makes ultra-light-weight backpacking tents. Data concerning the company's two product lines appear below:

 

Deluxe

Standard

Direct materials per unit

$50.00

$38.00

Direct labor per unit

$8.00

$6.80

Direct labor-hours per unit

0.70 DLHs

1.40 DLHs

Estimated annual production

10,000 units

50,000 units

The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:

Estimated total manufacturing overhead - $514,000

Estimated total direct labor-hours - 77,000 DLHs

Required -

1. Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system.

2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools:

Activity Cost Pools and Activity Measures

Estimated Overhead Cost

Expected Activity

Deluxe

Standard

Total

Supporting direct labor (direct labor-hours)

$385,000

7,000

70,000

77,000

 

Batch setups (setups)

78,000

200

100

300

Safety testing (tests)

51,000

30

70

100

Total manufacturing overhead cost

$514,000

 

 

 

Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.

Reference no: EM132478333

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