The company manufactures two products, Big and Small. The company has identified the following activities, overhead cost and cost drivers for two different products. Activity Center Activity Driver Costs Machine setup Number of setups $100,000 Special design Design hours $364,000 Production Direct labor hours $900,000 Machining Machine hours $300,000                                                   BIG           SMALL                  Number of Units produced 10,000.     35,000 Direct materials cost per unit $75.      $40 Direct labor cost per unit $19.50.         $13 Number of setups.         100                           100 Design hours           900                                    100 Direct labor hours 15,000.                   35,000 Machine hours 9,000 .                              1,000 A. Calculate the overhead rate using traditional. The allocation base is Direct labor hours B. Determine the cost per unit using Traditional. C. Calculate the overhead rates using ABC D. Determine the cost per unit using ABC E. Which costing method is more accurate?

Question

The company manufactures two products, Big and Small. The company has identified the following
activities, overhead cost and cost drivers for two different products.
Activity Center Activity Driver Costs
Machine setup Number of setups $100,000
Special design Design hours $364,000
Production Direct labor hours $900,000
Machining Machine hours $300,000


                                                  BIG           SMALL                 
Number of Units produced 10,000.     35,000
Direct materials cost per unit $75.      $40
Direct labor cost per unit $19.50.         $13
Number of setups.         100                           100
Design hours           900                                    100
Direct labor hours 15,000.                   35,000
Machine hours 9,000 .                              1,000

A. Calculate the overhead rate using traditional. The allocation base is Direct labor hours
B. Determine the cost per unit using Traditional.
C. Calculate the overhead rates using ABC
D. Determine the cost per unit using ABC
E. Which costing method is more accurate?

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