Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A’s production is much more labor-intensive than that of Model B. Model B is also the more popular of the two speakers. The following data have been gathered for the two products: Product Data Model AModel BUnits produced per year10,000100,000Prime costs$150,000$1,500,000Direct labor hours140,000300,000Machine hours20,000200,000Production runs4060Inspection hours8001,200Maintenance hours10,00090,000Overhead costs: Setup costs$270,000 Inspection costs$210,000 Machining$240,000 Maintenance$270,000 Total$990,000 Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the departmental rates do better than the plantwide rate?

Following are the calculation of overhead cost per unit for each product by using a plant wide rate…

Answered: Ramsey Company produces speakers (Model…

Cornerstones of Cost Management (Cornerstones Series)

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ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter13: The Balanced Scorecard: Strategic-based Control

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Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A’s production is much more labor-intensive than that of Model B. Model B is also the more popular of the two speakers. The following data have been gathered for the two products:

	Product Data
	Model A	Model B
Units produced per year	10,000	100,000
Prime costs	$150,000	$1,500,000
Direct labor hours	140,000	300,000
Machine hours	20,000	200,000
Production runs	40	60
Inspection hours	800	1,200
Maintenance hours	10,000	90,000
Overhead costs:
Setup costs	$270,000
Inspection costs	$210,000
Machining	$240,000
Maintenance	$270,000
Total	$990,000

Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the departmental rates do better than the plantwide rate?

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