Reference no: EM132535963

Boxcar Electronics uses the same machinery to produce multiple products. Total overhead cost for the company is $1,800,000. 72,000 direct labor hours were used during the year. The following additional information was found in the company's records:

Product A                           All Other                 Products                     Total

Units produced                       3,500             659,000                 662,500

Direct material cost                 $50,000        $4,450,000            $4,500,000

Direct labor cost                      $12,000             $488,000             $500,000

Machine hours                          16,500                 733,500               750,000

Direct labor hours                        2,200                  69,800               72,000

Engineering changes per year           5                       295                       300

Production set-ups                            30                    2,470                 2,500

Given the technological nature of these products, the company periodically modifies the products to meet customer-specific needs. Engineering overhead costs incurred to make these product changes total $480,000 per year. Each production run also requires a unique set-up for each product. Total set-up charges of $420,000 are included in manufacturing overhead. Other major activities, their total overhead costs, and related cost drivers are purchasing $315,000, material costs; production, $585,000, direct labor hours.

Question 1: Calculate the cost of Product A using the traditional method of overhead allocation.

Question 2: Estimate the product's overhead cost per unit using each of the following four possible allocation bases:

Direct material cost-

Direct labor cost-

Machine hours

Direct labor hours

Question 3: Calculate the total cost and unit cost of Product A using activity-based costing.