Question

The following data are for the two products produced by Shakti Company.


The company’s direct labor rate is $ 20 per direct labor hour (DLH). Additional information follows.


Required
1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. What is the gross profit per unit?
2. How much gross profit is generated by each customer of Product A using the plantwide overhead rate? How much gross profit is generated by each customer of Product B using the plantwide over-head rate? What is the cost of providing customer service to each customer? What information is provided by this comparison?
3. Determine the manufacturing cost per unit of each product line using ABC. What is the gross profit per unit?
4. How much gross profit is generated by each customer of Product A using ABC? How much gross profit is generated by each customer of Product B using ABC? Is the gross profit per customer adequate?
5. Which method of product costing gives better information to managers of this company? Explainwhy.


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  • CreatedNovember 29, 2013
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