Upton Manufacturing Corporation has a traditional costing system in which it app

Question

Upton Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, Long and Short, about which it has provided the following data:

The company's estimated total manufacturing overhead for the year is $3,170,400 and the company's estimated total direct labor-hours for the year is 60,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

1. The unit product cost of product Long under the company's traditional costing system is closest to:

2. Unit overhead cost of Product Short under the activity-based costing system is closest to:

Long Short Direct materials per unit $ 14.20 $ 48.30 Direct labor per unit $ 16.80 $ 50.40 Direct labor-hours per unit 0.80 2.40 Annual production 45,000 10,000

Explanation / Answer

1)

2)

(Amount in $)

Traditional method of absorption of Overhead Total Overheads = 3170400/(45000*0.8+10000*2.4) = $ 52.84 per labour hour Calculation of cost of product particulars Long short Direct material 14.2 48.3 Direct labour 16.8 50.4 over heads 42.27 126.82 (0.8*52.84) (2.4*52.84) 73.27 225.52

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