Rosman, Inc., manufactures and sells two products: Product Q1 and Product G2. Da

Question

Rosman, Inc., manufactures and sells two products: Product Q1 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

The direct labor rate is $28.20 per DLH. The direct materials cost per unit for each product is given below:

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

Required:

Calculate the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products. (Enter your answers as positive values rounded to two decimal places.)

- Traditional unit product cost:............? Product Q1 Product G2

- ABC unit product cost:...............?   Product Q1 Product G2

Rosman, Inc., manufactures and sells two products: Product Q1 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

Explanation / Answer

Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours   Product Q1 740      13.4      4,020        Product G2 840      10.4      3,280        Total direct labor-hours 7,300 Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Q1 Product G2 Total   Labor-related   DLHs                   105,656 4,020       3,280       7,300         Product testing   Tests                      78,408 1,260       1,680       2,940         General factory   MHs                   406,000 6,100       5,360       11,460       Total $590,064       Overhead allocation based on Activity   Labor-related            58,183            47,473          105,656   Product testing            33,603            44,805            78,408   General factory          216,108          189,892          406,000 Total          307,895          282,169          590,064 Under Traditional costing total OH alloacted on DLH basis are          324,939          265,125          590,064 Cost of Prodcution Traditional costing Details Product Q1 Product G2 Expected production 740 840 Direct Material                   218,744          158,592 Direct Labor                   113,364            92,496 Overhead allocated                   324,939          265,125 Total Cost of Production                   657,047          516,213 Unit cost of Production                      887.90            614.54 Cost of Prodcution ABC costing Expected production 740 840 Direct Material                   218,744          158,592 Direct Labor                   113,364            92,496 Overhead allocated                   307,895          282,169 Total Cost of Production                   640,003          533,257 Unit cost of Production                      864.87            634.83

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