Digital Storage Concept Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 3,750 direct labor hours. The total indirect labor is budgeted to be $375,000.
Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time supporting actual production.
The following information about cell phones and tablet PCs was determined from the corporate records:
Number of Setups Direct Labor Hours Units Cell phones 600 1,875 93,750 Tablet PCs 1,400 1,875 93,750 Total 2,000 3,750 187,500
Required: a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base. Complete the Activity Tables for cell phones and tablets: b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activitiesâone for setup and the other for production support.* c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing.* d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)?
* If required, round all per-unit answers to the nearest cent.
Digital Storage Concept Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 3,750 direct labor hours. The total indirect labor is budgeted to be $375,000.
Time records from indirect labor employees revealed that they spent 40% of their time setting up production runs and 60% of their time supporting actual production.
The following information about cell phones and tablet PCs was determined from the corporate records:
| Number of Setups | Direct Labor Hours | Units | |
| Cell phones | 600 | 1,875 | 93,750 |
| Tablet PCs | 1,400 | 1,875 | 93,750 |
| Total | 2,000 | 3,750 | 187,500 |
| Required: | |||||||||||
| |||||||||||
| * If required, round all per-unit answers to the nearest cent. |
Related questions
Problem 5-14A Comparing an ABC system with a traditional costingsystem LO 5-1, 5-2, 5-3
Richardson Electronics produces video games in three marketcategories: commercial, home, and miniature. Richardson hastraditionally allocated overhead costs to the three products usingthe companywide allocation base of direct labor hours. The companyrecently implemented an ABC system when it installedcomputer-controlled assembly stations that rendered the traditionalcosting system ineffective. In implementing the ABC system, thecompany identified the following activity cost pools and costdrivers.
| Category | Total Pooled Cost | Types ofCosts | CostDriver | ||
| Unit | $ | 697,000 | Indirect labor wages, supplies, factory utilities, | Machine hours | |
| Batch | 366,100 | Materials handling, inventory storage, labor for setups, | Number ofproduction orders | ||
| Product | 211,300 | Research anddevelopment | Time spent byresearch department | ||
| Facility | 510,400 | Rent, generalutilities, maintenance, facility depreciation, admin. salaries | Square footage | ||
| Additional datafor each of the product lines follow. |
| Commercial | Home | Miniature | Total | |||||||||
| Direct materials cost | $ | 36.50 | /unit | $ | 24.80 | /unit | $ | 30.50 | /unit | â | ||
| Direct labor cost | $ | 14.70 | /hour | $ | 14.70 | /hour | $ | 18.40 | /hour | â | ||
| Number of labor hours | 5,300 | 11,800 | 1,300 | 18,400 | ||||||||
| Number of machine hours | 18,000 | 48,000 | 16,000 | 82,000 | ||||||||
| Number of production orders | 280 | 2,200 | 320 | 2,800 | ||||||||
| Research and development time | 12 | % | 23 | % | 65 | % | 100 | % | ||||
| Number of units | 16,000 | 46,000 | 15,000 | 77,000 | ||||||||
| Square footage | 19,000 | 46,000 | 23,000 | 88,000 | ||||||||
Required: a. Determine the total cost and cost per unit for eachproduct line, assuming that overhead costs are allocated to eachproduct line using direct labor hours as a companywide allocationbase. Also determine the combined cost of all three product lines.(Round "Cost per unit" to 2 decimal places.)
Type of product Total cost cost per unit
commercial
home
miniature
combined total
b. Determine the total cost and cost per unit for each productline, assuming that an ABC system is used to allocate overheadcosts. Determine the combined cost of all three product lines.(Round intermediate calculations and "Cost per unit" answers to 2decimal places. Round "Total cost" to the nearest dollaramount.)
Type of product Total cost cost per unit
commercial
home
miniature
combined total
