Reference no: EM132583006
Matchbox Manufacturing has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).
The company has two products, Utility and Super, about which it has provided the following data:
Utility Super
Direct materials per unit $34.10 $52.70
Direct labor per unit $16.10 $39.10
Direct labor-hours per unit 0.70 1.70
Annual production 30,000 10,000
The company's estimated total manufacturing overhead for the year is $1,527,600 and the company's estimated total direct labor-hours for the year is 38,000.
The company is considering using an activity-based costing system to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity Measures Estimated Overhead Cost
Assembling products (DLHs) $608,000
Preparing batches (batches) 197,600
Axial milling (MHs) 722,000
Total $1,527,600
Utility Super Total
Assembling products 21,000 17,000 38,000
Preparing batches 456 1,520 1,976
Axial milling 570 874 1,444
Required:
Question 1: Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system.
Question 2: Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.