Question - Altima Company uses an overhead costing system based on direct labor hours for its two products X and Y. The company is considering adopting an activity-based costing system, and collects the following information for the month of October:
Product X Product Y
Production units 20,000 2,000
Direct materials cost per unit $50 $40
Direct labor cost per hour $10 $10
Direct labor hours 34,000 6,000
Overhead Total Activity Consumption
Overhead Cost Pool Cost Activity Product X Product Y
Machine setup 60,000 1,000 setups 300 700
Engineering change order 40,000 100 orders 20 80
Facility rent 90,000 1,000 sq. ft. 300 700
REQUIRED -
1. Compute the unit manufacturing cost of each product under a volume-based costing system based on direct labor hours.
2. Compute the unit manufacturing cost of each product under the activity-based costing system.