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problem: Your firm makes both widgets and gadgets. Information regarding these products is as follows:

 

Widgets

Gadgets

Direct materials per unit

$60.00

$45.00

Direct labor per unit 

$9.60

$7.20

Direct labor-hours per unit 

0.8 DLHs

0.6 DLHs

Estimated annual production 

10,000 units 

70,000 units

Your firm has a traditional costing system in which manufacturing overhead is applied to units based upon direct labor-hours. Information concerning manufacturing overhead and direct labor-hours for the upcoming year appears below:

Estimated total manufacturing overhead

$290,000

Estimated total direct labor hours

50,000 DLHs

 REQUIRED:

[A] find out the full unit product costs for Widgets and Gadgets using the traditional costing system.

Your firm is considering replacing its traditional costing system for estimating unit product costs with an activity-based costing system. The ABC system would have the given three activity cost pools:

Activities 

Activity Measures 

Estimated Overhead Cost

Expected activity widgets

Expected activity gadgets

Expected total activity 

Direct labor 

Direct labor hours 

$150,000

8,000

42,000

50,000

Batch setups 

Setups 

$60,000

200

50

250

Safety testing 

Number of tests

$80,000

80

20

100

Total manufacturing overhead costs 

 

$290,000

 

 

 

[B] REQUIRED:
find out the full unit product costs for Widgets and Gadgets using the ABC system.

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M922422

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