Traditional Product Costing versus Activity-Based Costing Ridgeland Inc. makes b
ID: 2534907 • Letter: T
Question
Traditional Product Costing versus Activity-Based Costing Ridgeland Inc. makes backpacks for large sporting goods chains that are sold under the customers' store brand names. The Accounting Department has identified the following overhead costs and cost drivers for next year: Overhead Item Expected Costs Cost Driver Maximum Quantity Setup costs $734,400 Number of setups 7,200 Ordering costs 195,000 Number of orders 65,000 Maintenance 1,380,000 Number of machine hours 80,000 Power 132,000 Number of kilowatt hours 440,000 Total predicted direct labor hours for next year is 39,000. The following data are for two recently completed jobs: Job 201 Job 202 Cost of direct materials $11,500 $13,000 Cost of direct labor $19,600 $63,300 Number of units completed 1,000 850 Number of direct labor hours 220 270 Number of setups 15 19 Number of orders 21 42 Number of machine hours 460 360 Number of kilowatt hours 200 300 a. Determine the unit cost for each job using a traditional plantwide overhead rate based on direct labor hours. Round cost per unit answers to two decimal places when applicable. Job 201 Job 202 Direct materials $Answer $Answer Direct labor Answer Answer Overhead Answer Answer Total cost $Answer $Answer Units produced Answer Answer Cost per unit $Answer $Answer b. Determine the unit cost for each job using ABC. Round cost per unit answers to two decimal places when applicable. Job 201 Job 202 Direct materials $Answer $Answer Direct labor Answer Answer Setup cost Answer Answer Ordering costs Answer Answer Maintenance costs Answer Answer Power Answer Answer Total job costs $Answer $Answer Units produced Answer Answer Cost per unit $Answer $Answer
Explanation / Answer
Answer a
Total Predicted Direct Labour Hours Next Year = 39,000
Total Overhead Cost = 2,441,400
Overhead Rate as per Traditional Plantwide Rate = 2441400 / 39000 = 62.60 per Direct Labour hour
Calculating Per Unit Cost of each Job.
Answer b
Overhead Item Expected Cost Setup Cost 7,34,400 Ordering Cost 1,95,000 Maintenance 13,80,000 Power 1,32,000 Total 24,41,400Related Questions
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