ABC Manufacturing, Inc. produces three gadgets (Ace, Best, and Champ) in two departments, Machining and Assembly. Each product requires one hour of direct labor for completion. The following table provides production and cost data for the year.
|
Ace
|
Best
|
Champ
|
Total
|
|
Number of units
|
25,000
|
15,000
|
5,000
|
45,000
|
|
Machine hours
|
2,500
|
1,500
|
2,000
|
6,000
|
|
Direct materials
|
$1,000,000
|
$450,000
|
$275,000
|
$1,725,000
|
|
Direct labor
|
375,000
|
225,000
|
75,000
|
675,000
|
|
Overhead
|
|
|
|
|
|
Machining
|
|
|
|
900,000
|
|
Assembly
|
|
|
|
450,000
|
|
Total overhead
|
|
|
|
1,350,000
|
|
Tot costs
|
|
|
|
$3,750,000
|
Required:
Use the plantwide allocation method to determine the unit cost for each product. The allocation bases to choose from are
a. Machine hours.
b. Direct labor costs.