Question

Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A’s production is much more labor-intensive than that of Model B. Model B is also the more popular of the two speakers. The following data have been gathered for the two products:
Required:
1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours.
2. Compute the overhead cost per unit for each product by using ABC.
3. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1 (machine intensive) with a rate of $ 3.50 per machine hour and Department 2 (labor intensive) with a rate of $ 0.90 per direct labor hour. The consumption of these two drivers is as follows:
Compute the overhead cost per unit for each product by using departmental rates.
4. Using the activity-based product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the depart-mental rates do better than the plantwide rate?


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  • CreatedSeptember 22, 2015
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