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




Direct materials per unit



Direct labor per unit 



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


Estimated total direct labor hours

50,000 DLHs


[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:


Activity Measures 

Estimated Overhead Cost

Expected activity widgets

Expected activity gadgets

Expected total activity 

Direct labor 

Direct labor hours 





Batch setups 






Safety testing 

Number of tests





Total manufacturing overhead costs 






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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