Problem - Flyer Corporation manufactures two products, Product A and Product B. Product B is the more complex of the two products, requiring three hours of direct labor time per unit to manufacture compared to one and one-half hours of direct labor time for each unit of Product A.
Overhead is currently assigned to the products on the basis of direct labor hours. The company estimated it would incur $423,300 in manufacturing overhead costs and produce 5,600 units of Product B and 22,000 unitsof Product A during the current year (for a total estimated direct labor hours of 49,800). Costs for materials and direct labor per unit of product are:
Required -
a. What would be the Predetermined Overhead Rate per DLH using Traditional Costing?
b. Using Traditional Costing, what amount of overhead would be applied to each unit of Product A? To each unit of product B?
c. Using Traditional Costing, calculate the product cost per unit for Product A and for Product B.
d. Using Activity Based Costing, calculate the predetermined overhead rate for each of the four cost pools.
e. Using Activity Based Costing, what amount of overhead would be applied to each unit of Product A? To each unit of Product B?
f. Using Activity Based Costing, calculate the product cost per unit for Product A and for Product B.