Homework SourseTraditional Product Costing versus ActivityBased Costing Rid
Traditional Product Costing versus Activity-Based Costing
Ridgeland Inc. makes backpacks for large sporting goods chains that are sold under the customers\' store brand names. The Accounting Department has identified the following overhead costs and cost drivers for next year:
Setup costs
$1,224,000
Number of setups
7,200
Ordering costs
325,000
Number of orders
65,000
Maintenance
2,300,000
Number of machine hours
80,000
Power
220,000
Number of kilowatt hours
440,00
Total predicted direct labor hours for next year is 52,000. The following data are for two recently completed jobs:
Job 201
Job 202
Cost of direct materials
$15,500
$17,000
Cost of direct labor
$23,600
$67,300
Number of units completed
1,250
1,100
Number of direct labor hours
220
280
Number of setups
15
19
Number of orders
21
42
Number of machine hours
460
360
Number of kilowatt hours
200
300
a. Determine the unit cost for each job using a traditional plantwide overhead rate based on direct labor hours.
Round cost per unit answers to two decimal places when applicable.
Job 201
Job 202
Direct materials
$Answer
$Answer
Direct labor
Answer
Answer
Overhead
Answer
Answer
Total cost
$Answer
$Answer
Units produced
Answer
Answer
Cost per unit
$Answer
$Answer
b. Determine the unit cost for each job using ABC. Round cost per unit answers to two decimal places when applicable.
Job 201
Job 202
Direct materials
$Answer
$Answer
Direct labor
Answer
Answer
Setup cost
Answer
Answer
Ordering costs
Answer
Answer
Maintenance costs
Answer
Answer
Power
Answer
Answer
Total job costs
$Answer
$Answer
Units produced
Answer
Answer
Cost per unit
$Answer
$Answer
| Setup costs | $1,224,000 | Number of setups | 7,200 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ordering costs | 325,000 | Number of orders | 65,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Maintenance | 2,300,000 | Number of machine hours | 80,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Power | 220,000 | Number of kilowatt hours | 440,00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total predicted direct labor hours for next year is 52,000. The following data are for two recently completed jobs:
|
Solution
a Setup cost 1224000 Ordering costs 325000 Maintenance 2300000 Power 220000 Total overhead cost 4069000 Predetermined overhead rate = total overhead cost / total direct labor hours Total overhead cost 4069000 Total direct labor hours 52000 Predetermined overhead rate 78.25 Per hour Job 201 Job 202 Predetermined overhead rate 78.25 78.25 Direct labor hours 220 280 Overhead cost 17215 21910 Traditional plant wide Job 201 Job 202 Direct material 15500 17000 Direct labor 23600 67300 Overhead 17215 21910 Total cost 56315 106210 Units produced 1250 1100 Cost per unit 45.05 96.55 b ABC Cost driver Cost per driver Setup cost 1224000 7200 170 Ordering costs 325000 65000 5 Maintenance 2300000 80000 28.75 Power 220000 44000 5 Total overhead cost 4069000 Job 201 Cost per driver Job 202 Setup cost 2550 170 3230 Ordering costs 105 5 210 Maintenance 13225 28.75 10350 Power 1000 5 1500 Total overhead cost 16880 15290 Traditional plant wide Job 201 Job 202 Direct material 15500 17000 Direct labor 23600 67300 Setup cost 2550 3230 Ordering costs 105 210 Maintenance 13225 10350 Power 1000 1500 Total cost 55980 99590 Units produced 1250 1100 Cost per unit 44.78 90.54
