Recek, Inc., manufactures and sells two products: Product Y5 and Product N7. Dat
ID: 2566153 • Letter: R
Question
Recek, Inc., manufactures and sells two products: Product Y5 and Product N7. 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 $22.90 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:
Which of the following statements concerning the unit product cost of Product N7 is true?
The unit product cost of Product N7 under traditional costing is less than its unit product cost under activity-based costing by $342.84.
The unit product cost of Product N7 under traditional costing is greater than its unit product under activity-based costing by $761.27.
The unit product cost of Product N7 under traditional costing is greater than its unit product under activity-based costing by $342.84.
The unit product cost of Product N7 under traditional costing is less than its unit product cost under activity-based costing by $761.27.
Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Y5 1,000 6.0 6,000 Product N7 400 8.0 3,200 Total direct labor-hours 9,200Explanation / Answer
Product N7 cost is as calculated below:
So it can be said that The unit product cost of Product N7 under traditional costing is less than its unit product cost under activity-based costing by $342.84.
Correct answer is A.
Total Total units 400 Hours per unit 8.0 Total direct labour hours 9,200 Manufacturing Overhead 1,294,207 Predetermined rate = manufacturing overhead/ Direct labour hours (1,294,207/9,200) 140.67 Traditional Particulars Product N7 Direct Materials 202.00 Direct labour (22.9*8) 183.20 Overhead (140.675*8) 1,125.40 Total manufacturing cost per stairway 1,510.60 ABC Particulars Particulars Product N7 Direct Materials 202.00 Direct labour (22.9*8) 183.20 Overhead 1,468.32 Total manufacturing cost per stairway 1,853.52 Difference 342.92 Estimated Expected Activity Product N7 Activity Cost Pools Activity Measures Overhead Cost Product Y5 Product N7 Total Labor-related DLHs $ 321,724 6,000 3,200 9,200 34.97 111904.00 Machine setups setups 67,221 400 500 900 74.69 37345.00 General factory MHs 905,362 4,800 4,500 9,300 97.35 438078.39 $ 1,294,207 587327.39 Total units 400.00 Per unit 1468.32Related Questions
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