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 $$1,700,000$ total factory overhead cost. The $$1,700,000$ was for the planned levels of machine and direct labor hours shown in the following table.

Production Department A Production Department B

Machine hours $6,80027,200$

Direct labor hours $34,00017,000$

The following information relates to the firm$$s operations for the month of January:

Deluxe Regular

Units produced and sold $3401,360$

Unit cost of direct materials $ $170$ $ $85\mathrm{.}00$

Hourly direct labor wage rate $ $25$ $ $34$

Direct labor hours in Department A per unit $22$

Direct labor hours in Department B per unit $11$

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:

Activity Budgeted Overhead Cost Driver Budgeted Quantity Driver Consumption

Deluxe Regular

Material movement $ $11,900$ Number of production runs $4032634$

Machine setups $680,000$ Number of setups $8504385$

Inspections $999,600$ Number of units $33,3203401,360$

Shipment $8,500$ Number of shipments $42585170$

$ $1,700,000$

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.$)$

Answer rating: 100% (QA)

1 Calculation of unit cost under the existing volumebased costing system a Calculate the allocation rate for each department Allocation rate for Department A Budgeted overhead cost for Department A Bu... View the full answer