3- Homework x ? Not secure l ezto.mheducation.com/hm.tpx Rosman, Inc., manufactu
ID: 2520220 • Letter: 3
Question
3- Homework x ? Not secure l ezto.mheducation.com/hm.tpx Rosman, Inc., manufactures and sells two products: Product Q1 and Product G2. The company currently uses a plantwide predetermined overhead rate based on direct labor-hours. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below Expected Direct Labor- Total Direct Production Hours Per Labor-Hours Unit Product Q1 Product G2 Total direct labor-hours 780 880 13.8 10 8 4,140 3,360 7,500 The direct labor rate is $28.60 per DLH. The direct materials cost per unit for each product is given below Direct Materials Cost per Unit $297.60 $190 80 Product Q1 Product G2 The company is considering adopting an activity-based costing system with the following activity cost pools activity measures, and expected activity Estimated Expected Activity Activity Measures Overhead Cost Product G2 3,360 5,520 Activity Cost Product Q1 Total Pools Labor-related DLHs Product testing Tests General factory MHs $106,656 79,208 4,140 1,320 6,300 7,500 11,820 $593,864 Required: Calculate the difference between the unit product costs under the traditional costing method and the actvity-based costing system for each of the two products (Round your intermediate calculations and O Type here to search upExplanation / Answer
Computation of Product Cost under Traditional Method
Particulars
Product 1
Product 2
Direct Material
$ 297.60
$ 190.80
Direct Labor
Product1-13.80 hrs x $28.60
$ 394.68
Product2 -10.80 hrs x $28.60
$ 308.88
Direct Cost Per Unit--A
$ 692.28
$ 499.68
Indirect Expenses:
Labor related:
Product 1 -'$106,656 /7,500 x 4,140
$ 58,874.11
Product 2 -'$106,656 /7,500 x 3,360
$ 47,781.89
Product Testing:
Product 1 -'$79,208 /7,500 x 4,140
$ 43,722.82
Product 2 -'$79,208 /7,500 x 3,360
$ 35,485.18
General Factory:
Product 1 -'$408,000 /7,500 x 4,140
$ 225,216.00
Product 2 -'$408,000 /7,500 x 3,360
$ 182,784.00
Total Indirect Expneses
$ 327,812.93
$ 266,051.07
No of Units
780
880
Indirect Cost per Unit-B
$ 420.27
$ 302.33
Product Cost per Unit( A +B)
$ 1,112.55
$ 802.01
Computation of Cost per Driver(Labor related per hr)
Activity Cost pools
Labor related
$ 106,656
Total DLHS
7,500
Cost per hr
$106,656 /7,500
$ 14.22
Computation of Cost per Driver(Production Testing per Test)
Activity Cost pools
Prodcuction Testing
$ 79,208
Total Tests
3,080
Cost per Test
$79,208/3,080
$ 25.72
Computation of Cost per Driver(General Factory per MH)
Activity Cost pools
General Factory
$ 408,000
MHS
11,820
Cost per MH
$408,000/11,820
$ 34.52
Computation of Allocated Cost using ABC Method
Product 1
Product 2
Labor related
Product 1-$14.22 x 4,140 hrs
$ 58,874.11
Product 2-$14.22 x 3,360 hrs
$ 47,781.89
Production Testing
Product 1-$25.72 x 1,320 Tests
$ 33,946.29
Product 2-$25.72 x 1,760 Tests
$ 45,261.71
General Factory
Product 1-$34.52 x 6,300 MHS
$ 217,461.93
Product 2-$34.52 x 5,520 MHS
$ 190,538.07
Total Indirect Cost
$ 310,282.33
$ 283,581.67
no of units produced
780
880
Indirect Cost per Unit
$ 397.80
$ 322.25
Computation of Product Cost under ABC
Particulars
Product 1
Product 2
Direct Material
$ 297.60
$ 190.80
Direct Labor
Product1-13.80 hrs x $28.60
$ 394.68
Product2 -10.80 hrs x $28.60
$ 308.88
Indirect Cost
$ 397.80
$ 322.25
Product Cost
$ 1,090.08
$ 821.93
Product 1
Product 2
Traditional Unit Product Cost
$ 1,112.55
$ 802.01
ABC Unit Product Cost
$ 1,090.08
$ 821.93
Difference
$ 22.48
$ (19.92)
Computation of Product Cost under Traditional Method
Particulars
Product 1
Product 2
Direct Material
$ 297.60
$ 190.80
Direct Labor
Product1-13.80 hrs x $28.60
$ 394.68
Product2 -10.80 hrs x $28.60
$ 308.88
Direct Cost Per Unit--A
$ 692.28
$ 499.68
Indirect Expenses:
Labor related:
Product 1 -'$106,656 /7,500 x 4,140
$ 58,874.11
Product 2 -'$106,656 /7,500 x 3,360
$ 47,781.89
Product Testing:
Product 1 -'$79,208 /7,500 x 4,140
$ 43,722.82
Product 2 -'$79,208 /7,500 x 3,360
$ 35,485.18
General Factory:
Product 1 -'$408,000 /7,500 x 4,140
$ 225,216.00
Product 2 -'$408,000 /7,500 x 3,360
$ 182,784.00
Total Indirect Expneses
$ 327,812.93
$ 266,051.07
No of Units
780
880
Indirect Cost per Unit-B
$ 420.27
$ 302.33
Product Cost per Unit( A +B)
$ 1,112.55
$ 802.01
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