Instructions:
Complete the following activities in good form. Use excel or word only. Provide all supporting calculations to show how you arrived at your numbers.
Activity-Based Costing:
Welk 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, H16Z and P25P, about which it has provided the following data
H16Z P25P
Direct materials per unit……………. $10.20 $50.50
Direct labor per unit …………………. $8.40 $25.20
Direct labor-hours per unit ………… 0.40 1.20
Annual production……………………. 30,000 10,000
The company’s estimated total manufacturing overhead for the year is $1,464,480 and the company’s estimated total direct labor-hours for the year is 24,000.
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)…………….. $ 552,000
Setting up machines (setups) ………………… 132,480
Parts administration (part types)……………. 780,000
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Total………………………………………………….$1,464,480
H16Z P25P Total
Supporting direct labor …… 12,000 12,000 24,000
Setting up machines……….. 864 240 1,104
Parts administration ……….. 600 960 1,560
Required:
a. Determine the manufacturing overhead cost per unit of each of the company’s two products under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company’s two products under activity-based costing system.