Hot Summer Days Corporation (HSDC) manufactures two products, Bocce Ball Sets and Croquet Sets. Croquet Sets were added as a product line two years ago. Croquet Sets are the more complex of the two products, requiring one hour of direct labor time per unit to manufacture, compared to one-half hours of direct labor time for Bocce Ball Set. Croquet Sets are produced on an automated production line.

Indirect costs are currently allocated to the products on the basis of direct labor hours. The company estimated it would incur $332,500 in manufacturing overhead costs and produce 6,000 units of Croquet Sets and 20,000 units of Bocce Ball Sets during the current year.

Unit costs for materials and direct labor are:

	Bocco Ball Set	Croquet Set
Direct labor	$9	$18
Direct Material	$12	$16

Indirect Costs Are:

	Estimated Indirect Costs	Estimated Activity Bocco Ball Sets	Estimated Activity Croquet Sets	Total
Activity cost pools/drivers	153,000	700	1,000	1,700
Machine Setups	27,500	300	200	500
Machine Hours	128,000	5,000	11,000	16,000
Maintenance Requests	24,000	200	300	500
Total	332,500

Required:

1). Determine the unit cost of a Bocce Ball and Croquet Set using traditional costing with units as the allocation base. 

2). Determine the unit cost of a Bocce Ball and Croquet Set using activity-based costing. 

Answer rating: 100% (QA)

Requirement 1 Unit cost using Traditional costing Plant ... View the full answer