Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below: Deluxe Standard Direct materials per unit $ 68.00 $ 56.00 Direct labor per unit $ 26.00 $ 21.20 Direct labor-hours per unit 0.70 DLHs 1.40 DLHs Estimated annual production 10,000 units 50,000 units The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead $ 586,000 Estimated total direct labor-hours 77,000 DLHs Required: 1. Determine the unit product costs of the Deluxe and Standard products under the company’s traditional costing system. 2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools: Expected Activity Activity Cost Pools and Activity Measures EstimatedOverhead Cost Deluxe Standard Total Supporting direct labor (direct labor-hours) $ 385,000 7,000 70,000 77,000 Batch setups (setups) 132,000 200 100 300 Safety testing (tests) 69,000 30 70 100 Total manufacturing overhead cost $ 586,000 Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...

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Stillicum Corporation makes ultra light-weight backpacking tents. Data concerning the company’s two product lines appear below:

	Deluxe	Standard
Direct materials per unit	$	68.00		$	56.00
Direct labor per unit	$	26.00		$	21.20
Direct labor-hours per unit		0.70	DLHs		1.40	DLHs
Estimated annual production		10,000	units		50,000	units

The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:


Estimated total manufacturing overhead	$	586,000
Estimated total direct labor-hours		77,000	DLHs

Required:

1. Determine the unit product costs of the Deluxe and Standard products under the company’s traditional costing system.

2. The company is considering replacing its traditional costing system with an activity-based absorption costing system that would have the following three activity cost pools:

		Expected Activity
Activity Cost Pools and Activity Measures	Estimated Overhead Cost	Deluxe	Standard	Total
Supporting direct labor (direct labor-hours)	$	385,000	7,000	70,000	77,000
Batch setups (setups)		132,000	200	100	300
Safety testing (tests)		69,000	30	70	100
Total manufacturing overhead cost	$	586,000

Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.

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