Which of the following statements concerning the unit product cost of Product W2 is true? (Round your intermediate calculations to 2 decimal places.)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Fleurant, Inc., manufactures and sells two products: Product W2 and Product P8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
| Expected Production | Direct Labor-Hours Per Unit | Total Direct Labor-Hours | |
| Product W2 | 400 | 5 | 2,000 |
| Product P8 | 500 | 4 | 2,000 |
| Total direct labor-hours | 4,000 | ||
The direct labor rate is $37.10 per DLH. The direct materials cost per unit is $203.60 for Product W2 and $140.30 for Product P8.
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
| Estimated | Expected Activity | |||||
| Activity Cost Pools | Activity Measures | Overhead Cost | Product W2 | Product P8 | Total | |
| Labor-related | DLHs | $ | 218,576 | 2,000 | 2,000 | 4,000 |
| Production orders | orders | 18,538 | 400 | 380 | 780 | |
| Order size | MHs | 202,886 | 3,880 | 3,680 | 7,560 | |
| $ | 440,000 | |||||
Which of the following statements concerning the unit product cost of Product W2 is true? (Round your intermediate calculations to 2 decimal places.)
| A. |
The unit product cost of Product W2 under traditional costing is less than its unit product cost under activity-based costing by $220.00. |
|
| B. |
The unit product cost of Product W2 under traditional costing is greater than its unit product cost under activity-based costing by $7.32. |
|
| C. |
The unit product cost of Product W2 under traditional costing is greater than its unit product cost under activity-based costing by $220.00. |
|
| D. |
The unit product cost of Product W2 under traditional costing is less than its unit product cost under activity-based costing by $7.32
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