Pack-Lite Corporation makes an ultra-lightweight backpack. Data concerning the c

Question

Pack-Lite Corporation makes an ultra-lightweight backpack. Data concerning the company's two product lines appear below: 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 Determine the unit product costs of the Deluxe and Standard products under the company's traditional costing system. Standard Deluxe The company is considering replacing its traditional costing system for determining unit product costs with an activity based costing (ABC) system. The activity-based costing system would have the following three activity cost pools: Determine the unit product costs of the Deluxe and Standard products under the activity-based costing system. Standard Deluxe

Explanation / Answer

1 standard Deluxe Estimated annual production 70000 units 10000 units Direct material per unit $45 $60 Direct labor $7.20 $9.60 Manufacturing overheads based on direct labor hours $0.42 $4 Unit production cost $52.62 $73.60 Manufacturing overheads: Standard     50000*.60/70000=$0.42 Deluxe        50000*.80/10000=$4 2 standard Deluxe Estimated annual production 70000 units 10000 units Direct material per unit $45 $60 Direct labor $7.20 $9.60 Manufacturingoverhead cost taking batch set ups as basis $0.17 $4.80 Unit production cost $52.37 $74.40 Batch set up cost $60,000 set up ratio between standard and Deluxe 50:200 standard =60000*50/2500 $12,000 per unit =12000/70000=$0.17 Deluxe    =60000*200/250 $48,000 per unit=48000/10000=$4.80

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