Manji Carter Company manufactures two products, Deluxe and Regular, and uses a traditional two-stage cost allocation system. The firststage assigns all factory overhead costs to two production departments, A and B. based on machine hours. The second stage usesdirect labor hours to allocate overhead to individual products.For the current year, the firm budgeted $1,550,000 total factory overhead cost. The $1,550,000 was for the planned levels of machineand direct labor hours shown in the following table.Machine hoursDirect labor hoursUnits produced and soldUnit cost of direct materialsThe following information relates to the firm's operations for the month of January:Hourly direct labor wage rateDirect labor hours in Department A per unitDirect labor hours in Department B per unitActivityMaterial movementMachine setupsInspectionsShipmentProductionProductionDepartment A Department B6,20031,0001. Deluxe unit costRegular unit cost2. Deluxe unit overheadRegular unit overheadDeluxe unit costRegular unit cost3.24,80015,500Carter Company is considering implementing an activity-based costing system. Its management accountant has collected the followinginformation for activity cost analysis for the current year:BudgetedOverhead$ 10,850620,000911,4007,750$ 1,550,000Deluxe310$ 155$ 2521Regular1,248$ 77.50$3121Cost DriverNumber of production runsNumber of setupsNumber of unitsNumber of shipmentsBudgeted Driver ConsumptionQuantity DeluxeRegular40377530,380388Required:1. Calculate the unit cost for each of the two products under the existing volume-based costing system. (Round "Regular unit cost" to2 decimal places.)2339310782. Calculate the overhead per unit of the cost driver under the proposed ABC system. (Round your answers to 2 decimal places.)3. Calculate the unit cost for each of the two products if the proposed ABC system is adopted. (Round your Intermediate calculationsto 1 decimal place and final answers to 2 decimal places.)31781,240155

Introduction:Activity-Based Costing (ABC) is a costing methodology that assigns overhead costs to…

Carter Company manufactures two products, Deluxe and Regular, and uses a traditional two-stage cost allocation system. The first stage assigns all factory overhead costs to two production departments, A and B, based on machine hours. The second stage uses direct labor hours to allocate overhead to individual products. For the current year, the firm budgeted $1,550,000 total factory overhead cost. The $1,550,000 was for the planned levels of machine and direct labor hours shown in the following table. Machine hours Direct labor hours Units produced and sold Unit cost of direct materials Hourly direct labor wage rate Direct labor Production Production Department A Department B 6,200 31,000 The following information relates to the firm's operations for the month of January: Deluxe Regular 310 $ 155 $ 25 1,240 $77.50 $ 31 urs in Department A per unit Direct labor hours in Department B per unit Activity Material movement Machine setups Inspections Shipment Carter Company is considering implementing an activity-based costing system. Its management accountant has collected the following information for activity cost analysis for the current year. 24,800 15,500 Budgeted Overhead $ 10,850 620,000 911,400 7,750 $1,550,000 Cost Driver Number of production runs Number of setups Number of units Number of shipments Budgeted Quantity 403 775 30,380 388 Driver Consumption Deluxe Regular 31 78 1,240 155 23 39 310 78 Required: 1. Calculate the unit cost for each of the two products under the existing volume-based costing system. (Round "Regular unit cost" to 2 decimal places.) 2. Calculate the overhead per unit of the cost driver under the proposed ABC system. (Round your answers to 2 decimal places.) 3. Calculate the unit cost for each of the two products if the proposed ABC system is adopted. (Round your Intermediate calculations to 1 decimal place and final answers to 2 decimal places.)

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q