Harrison company makes two products. management expects the manufacturing overhead costs for the year to be 150,00. The company is considering whether to use an activity based costing system or the traditional product costing system. The traditional cost system allocates the overhead on the basis of direct labor hours. under the activity based system, the overhead is allocated on the basis of engineering design time.
- Rascon Parcel
- Direct materials cost per unit 15.00 25.00
- direct labor cost per unit 7.00 4.00
- direct labor hours per unit .50 .30
- number of units produced 22,000 82,000
- engineering design time (hrs) 4,000 4,000
1. What is the unit product cost for Rascon using the proposed ABC system?
2. What is the unit product cost for Rascon using the traditional product costing system?