Campbellsville University Welk Manufacturing Corp Activity Based Costing Data Solution
Question Description
Activity-Based Costing
Welk Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, H16Z and P25P, about which it has provided the following data:
|
H16Z |
P25P |
|
|
Direct materials per unit ……………. |
$10.20 |
$50.50 |
|
Direct labor per unit …………………. |
$8.40 |
$25.20 |
|
Direct labor-hours per unit ………… |
0.40 |
1.20 |
|
Annual production ……………………. |
30,000 |
10,000 |
The companys estimated total manufacturing overhead for the year is $1,464,480 and the companys estimated total direct labor-hours for the year is 24,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
|
Activities and Activity Measures |
Estimated Overhead Cost |
|
Supporting direct labor (DLHs) …………….. |
$ 552,000 |
|
Setting up machines (setups) ………………… |
132,480 |
|
Parts administration (part types) ……………. |
780,000 |
|
Total ………………………………………………….. |
$1,464,480 |
|
H16Z |
P25P |
Total |
|
|
Supporting direct labor …… |
12,000 |
12,000 |
24,000 |
|
Setting up machines ……….. |
864 |
240 |
1,104 |
|
Parts administration ……….. |
600 |
960 |
1,560 |
Required:
- Determine the manufacturing overhead cost per unit of each of the company’s two products under the traditional costing system.
- Determine the manufacturing overhead cost per unit of each of the company’s two products under activity-based costing system.
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