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Q1) Carroll Company manufactures two products, Product DRT and Product CRT.

Company estimated it would incur $130,890 in manufacturing overhead costs in current period. Overhead presently is allocated to the products on basis of direct labour hours. Data concerning present period's operations appear below:

  Product DRT Product CRT
Estimated volume 400 units 1,200 units
Direct labour hours per unit  0.70 hour 1.20 hours
Direct materials cost per unit $10.70 $16.70
Direct labour cost per unit $11.20 $19.20

Company is considering using activity-based costing system to find out unit product costs instead of its traditional system based on direct labour hours. Activity-based costing system would use three activity centres.  Data relating to these activities for present period:

    Expected Activity
Activity Center Estimated Overhead Costs Total DRT CRT
Machine setups $13,570 230 100 130
Purchase orders 91,520 2,080 810 1,270
General factory 25,800 1,720 280 1,440
  $130,890      

Find out unit product cost of each product for presnt period using activity-based costing approach. (Material and direct labour are unchanged. Variety of arithmetic paths can be utilized to deal with over head. Usually, you should assign the three overhead pools between two products, and then compute overhead per unit.)

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M918508

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