Traditional Product Costing versus ActivityBased Costing 1 D

Traditional Product Costing versus Activity-Based Costing

1. 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.

Hammond Air 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:

Total predicted direct labor hours for next year is 26,000. The following data are for two recently completed jobs:

Solution

1. Determine the unit cost for each job using a traditional plantwide overhead rate based on direct labor hours

Predetermine overhead rate =estimated Total overhead/estimated total labour hour

= (244800+65000+460000+44000)/26000

Predetermine overhead rate = 31.30 per direct labour hour