Determine the unit product cost of each product for the current period.
Carroll Company manufactures two products, Product DRT and Product CRT.
The company estimated it would incur $130,890 in manufacturing overhead costs during the current period. Overhead currently is assigned to the products on the basis of direct labour hours. Data concerning the current period\'s operations appear below:
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|
Product DRT
|
Product CRT
|
|
Estimated volume
|
400 units
|
1,200 units
|
|
Direct labour hours per unit
|
0.70 hour
|
1.20 hours
|
|
Direct materials cost per unit
|
$10.70
|
$16.70
|
|
Direct labour cost per unit
|
$11.20
|
$19.20
|
The company is considering using an activity-based costing system to compute unit product costs instead of its traditional system based on direct labour hours. The activity-based costing system would use three activity centres. Data relating to these activities for the current period:
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|
|
Expected Activity
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|
Activity Center
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Estimated Overhead Costs
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Total
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DRT
|
CRT
|
|
Machine setups
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$13,570
|
230
|
100
|
130
|
|
Purchase orders
|
91,520
|
2,080
|
810
|
1,270
|
|
General factory
|
25,800
|
1,720
|
280
|
1,440
|
|
|
$130,890
|
|
|
|
Determine the unit product cost of each product for the current period using the activity-based costing approach. (Material and direct labour are unchanged. A variety of arithmetic paths can be used to deal with over head. Generally, you must allocate the three overhead pools between the two products, and then calculate the overhead per unit.)