Rosman, Inc., manufactures and sells two products: Product Q1 and Product G2. Da
ID: 2444653 • Letter: R
Question
Rosman, Inc., manufactures and sells two products: Product Q1 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
The direct labor rate is $28.60 per DLH. The direct materials cost per unit for each product is given below:
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Required:
Calculate the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products. (Enter your answers as positive values rounded to two decimal places.)
Rosman, Inc., manufactures and sells two products: Product Q1 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Explanation / Answer
Unit Product cost using Activity Based Costing :-
Product Q1
Product G2
DM
(297.60 * 780)
=232128
(190.80 * 880)
=167904
DL
(13.8 * 28.60) * 780
=307850
(10.80 * 28.60) * 880
=271814
Overhead:-
Labour related
(106656/7500) * 4140
=58874
(106656/7500) * 3360
=47782
Product testing
(79208/3080) * 1320
=33946
(79208/3080) * 1760
=45262
General Factory
(408000/11820) * 6300
=217462
(408000/11820) * 5520
=190538
Total Cost (A)
850260
723300
Units Production (expected) (B)
780
880
Unit Cost (A/B)
1090
822
Unit Product cost using Traditional Method :-
Product Q1
Product G2
DM
(297.60 * 780)
=232128
(190.80 * 880)
=167904
DL
(13.8 * 28.60) * 780
=307850
(10.80 * 28.60) * 880
=271814
Overhead
(593864/7500) * 4140
=327813
(593864/7500) * 3360
=266051
Total Cost (A)
867791
705769
Units Production (expected) (B)
780
880
Unit Cost (A/B)
1113
802
Product Q1
Product G2
ABC costing
1090
822
Traditional Method
1113
802
Difference
23
-20
Product Q1
Product G2
DM
(297.60 * 780)
=232128
(190.80 * 880)
=167904
DL
(13.8 * 28.60) * 780
=307850
(10.80 * 28.60) * 880
=271814
Overhead:-
Labour related
(106656/7500) * 4140
=58874
(106656/7500) * 3360
=47782
Product testing
(79208/3080) * 1320
=33946
(79208/3080) * 1760
=45262
General Factory
(408000/11820) * 6300
=217462
(408000/11820) * 5520
=190538
Total Cost (A)
850260
723300
Units Production (expected) (B)
780
880
Unit Cost (A/B)
1090
822
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