Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $204,000, consisting of the following activity cost pools for the current month:

Total direct labor hours used during the month were 8,000. Panasonic produces many different electronic products, including the following two products produced during the current month:

Required

a. Calculate the total per-unit cost of each model using direct labor hours to assign manufacturing overhead to products.

b. Calculate the total per-unit cost of each model using activity-based costing to assign manufacturing overhead to products.

c. Comment on the accuracy of the two methods for determining product costs.

d. Discuss some of the strategic implications of your answers to the previous requirements.

Transcribed Image Text:

Cost Drivers Activity Level Setup hours 1,500 Number of moves.. 300 50 120,000 Assembly hours 12,000 10 24,000 Maintenance hours.. 1,200 20 $204,000 Activity Centers Assembly setups Materials handling Assembly. Maintenance. Total.. Activity Costs $ 45,000 15,000