Required: Determine the unit product cost of each of the company's two products under activity-based costing system. Torri Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate basedon direct labor-hours (DLHS). The company has two products, B40W and C63J, about which it has provided the following data:B40WC63JDirect materials per unitDirect labor per unitDirect labor-hours per unitAnnual productionP 34.90P 20.80P 63.70P 62.400.82.4DL/product35,00015,00028,00036,000The company's estimated total manufacturing overhead for the year is P2,656,000 and the company's estimated total direct labor-hours for the year is 64,000. Thecompany is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costingsystem appear below:EstimatedActivities and Activity Measures OverheadCost1,216,000Assembling products (DLHS)Preparing batches (batches)Milling (MHS)Total480,000960,0002,656,000ActivitiesAssembling products (DLHS)Preparing batches (batches)Milling (MHs)B40WC63JTotal28,0002,30436,0002,4962,11264,0004,8003,2001,088

Activity based costing means where the product is valued on the basis of actual direct material ,…

Answered: Required: Determine the unit product…

Business

Accounting

Required: Determine the unit product cost of each of the company's two products under activity-based costing system.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Required: Determine the unit product cost of each of the company's two products under activity-based costing system.

Torri 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, B40W and C63J, about which it has provided the following data:
B40W
C63J
Direct materials per unit
Direct labor per unit
Direct labor-hours per unit
Annual production
P 34.90
P 20.80
P 63.70
P 62.40
0.8
2.4
DL/product
35,000
15,000
28,000
36,000
The company's estimated total manufacturing overhead for the year is P2,656,000 and the company's estimated total direct labor-hours for the year is 64,000. 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:
Estimated
Activities and Activity Measures Overhead
Cost
1,216,000
Assembling products (DLHS)
Preparing batches (batches)
Milling (MHS)
Total
480,000
960,000
2,656,000
Activities
Assembling products (DLHS)
Preparing batches (batches)
Milling (MHs)
B40W
C63J
Total
28,000
2,304
36,000
2,496
2,112
64,000
4,800
3,200
1,088

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