Problem

The manufacturing division of an electronics company uses activity-based costing. The company has identified three activities and the related cost drivers for indirect production costs:

Activity           Cost Driver

?Activity 1        Direct materials Cost

Activity 2        Direct Labor Cost

Activity 3        Kilowatt Hours

Three types of products are produced. Direct costs and cost-driver activity for each product for a month are as follows:

                                             Product A            Product B            Product C
Direct material cost                  $75,000              $50,000              $125,000
Direct Labor Cost                    $6,600                $1,000                $3,000
Direct Labor hours                  $2,000                $1,000                $2,000
Kilowatt hours                        $150,000            $200,000             $150,000

Indirect productioncosts for the month are as follows:

Activity 1            $30,000
Activity 2            $20,000
Activity 3            $16,000
Total                  $66,000

A.) Compute the indirect production costs allocated to each product using the ABC system?

B.) Compute the indirect production costs allocated to each product using a traditional costing system. Assume indirect production costs are allocated to each product using the cost driver: direct labor hours?