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The following data are for the two products produced by Shakti Company.

1970_267-B-M-A-A-B-C (918)-1.png

The company's direct labor rate is $ 20 per direct labor hour (DLH). Additional information follows.

1849_267-B-M-A-A-B-C (918)-2.png

Required: 

1. Compute the manufacturing cost per unit using the plant wide overhead rate based on direct labor hours. What is the gross profit per unit? 

2. How much gross profit is generated by each customer of Product A using the plant wide overhead rate? How much gross profit is generated by each customer of Product B using the plant wide over-head rate? What is the cost of providing customer service to each customer? What information is provided by this comparison? 

3. Determine the manufacturing cost per unit of each product line using ABC. What is the gross profit per unit?

4. How much gross profit is generated by each customer of Product A using ABC? How much gross profit is generated by each customer of Product B using ABC? Is the gross profit per customer adequate? 

5. Which method of product costing gives better information to managers of this company? Explain why.

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