Reference no: EM13646463

Werger Manufacturing Corporation 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, W82R and L48S, about which it has provided the following data:

		W82R	L48S
	Direct materials per unit................	$11.50	$62.90
	Direct labor per unit......................	$2.00	$13.00
	Direct labor-hours per unit............	0.20	1.30
	Annual production........................	45,000	10,000

The company's estimated total manufacturing overhead for the year is $1,521,960 and the company's estimated total direct labor-hours for the year is 22,000.

The company is considering using a variation of activity-based costing 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
	Supporting direct labor (DLHs)...........	$   352,000
	Setting up machines (setups)...............	201,960
	Parts administration (part types)..........	968,000
	Total.....................................................	$1,521,960

	Activities	W82R	L48S	Total
	Supporting direct labor......	9,000	13,000	22,000
	Setting up machines...........	814	374	1,188
	Parts administration...........	924	1,012	1,936

Required:

a. Determine the unit product cost of each of the company's two products under the traditional costing system.

b. Determine the unit product cost of each of the company's two products under activity-based costing system.