Problem - Memory Media Inc. is considering a change to activity-based product costing. The company produces two products, CDs and DVDs, in a single production department. The production department is estimated to require 4,000 direct labor hours. The total indirect labor is budgeted to be $420,000.
Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time supporting actual production.
The following information about CDs and DVDs was determined from the corporate records:
|
|
Number of Setups
|
Direct Labor Hours
|
Units
|
|
CDs
|
500
|
2,000
|
75,000
|
|
DVDs
|
1,100
|
2,000
|
75,000
|
|
Total
|
1,600
|
4,000
|
150,000
|
If required, round all per unit answers to nearest whole cent.
a. Determine the indirect labor cost per unit allocated to CDs and DVDs under a single plant wide factory overhead rate system using the direct labor hours as the allocation base.
b. Determine the activity pools and activity rates for the indirect labor under activity-based costing. Assume two activity pools-one for setup and the other for production support.
c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.